Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

Textile and Clothing Industries

Mr. Doran: asked the Chancellor of the Duchy of Lancaster when he next plans to meet the Trades Union Congress to discuss the future of the textile and clothing industries.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): I have no plans to do so at present, but my hon. Friend the Minister for Trade has agreed to a request for a meeting with members of the TUC economic committee and textiles, clothing and footwear committee in connection with the GTT multilateral trade negotiations.

Mr. Doran: Given the strategic importance of the British textile industry and the fact that it recently reported a trading deficit—[HON. MEMBERS: "Reading."]

Mr. Speaker: Order. The hon. Gentleman is a new Member. We do not read our questions in the Chamber.

Mr. Doran: I shall repeat my question. Given the strategic importance of the British textile industry and the fact that it recently reported a trading deficit of £2·5 billion, what proposals does the Minister have for improving the position of the industry?

Mr. Clarke: First, I agree with the hon. Gentleman about the importance of the industry. I am glad to say that the performance and position of the industry are steadily improving. There has been a welcome increase in investment and productivity. That must the basis of its long-term survival and recovery, so that it can maintain its contribution to the British economy, We have also negotiated a new multi-fibre arrangement that will help to protect the industry against unfair competition.

Mr. Nicholas Winterton: Does my right hon. and learned Friend accept that the textile and clothing industries not only make a major contribution to the economy but are substantial employers? Will he pay tribute to the number of people who work in the industry, who have always been responsible and have not indulged in irresponsible industrial relations? Will he seek to ensure that the British Government will guarantee fair competition for this valuable sector of the British economy, and that if we guarantee access to our market for goods from overseas, those countries that supply us will reciprocate?

Mr. Clarke: I come from a Department in which I was particularly well informed about the contribution that the industry makes to employment, and also about the contribution that good industrial relations in the industry have made to its performance. I therefore endorse what my hon. Friend has said about that.
I am sure that my hon. Friend the Minister for Trade will continue to ensure that the industry is protected against unfair competition. I am glad to say that the competitive position of the industry in overseas markets is improving. I am sure that my hon. Friend the Member for Macclesfield (Mr. Winterton) welcomes the news that came out a few days ago, which showed that the textile and clothing industries had substantially increased their volume of exports overseas, particularly to the EEC.

Mr. McAllion: The Minister will know that the United Kingdom jute industry is now wholly located in the Tayside region in Scotland, and that a thousand jobs depend on it. He will also know that last January I led a delegation of employers and trade unionists to lobby Ministers and put proposals to them for safeguarding that industry. When can the jute industry expect a response to those proposals?

Mr. Clarke: I recognise the importance of jute in Dundee because of my recent visit to the city, when I spoke on behalf of the hon. Gentleman's unsuccessful opponent——

Mr. Ernie Ross: Come again.

Mr. Speaker: Order.

Mr. Clarke: There will be more visits to Scotland.
I also know that the hon. Gentleman presented a paper to my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Lang) earlier this year, which was handed on to my Department as well. That has been followed up by officials of my Department meeting representatives of the jute industry in Dundee. We shall certainly keep in close touch and continue to consider the case concerning overseas trade, and the position of the industry with regard to its competitors.

Mr. Burt: Will my right hon. and learned Friend also pay tribute to the changes of attitude in the industry in the past few years—its willingness to adapt, innovate and bring in new technology, which, like the very good industrial relations, has also been responsible for the industry's improving position?

Mr. Clarke: Yes, indeed. When I followed these matters in the late 1970s, I met many textile interests. I find now that there has been a considerable change in the industry's approach to the future. Nowadays it is a modern, forward-looking industry which has adapted to high technology and is becoming far more competitive, producing good quality products and improving its efficiency. That is how we must continue.

Sub Post Offices

Mr. Matthew Taylor: asked the Chancellor for the Duchy of Lancaster what representations he has received on the future of the sub post office network.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): Since the election we have received one inquiry on this topic from an hon.


Member on behalf of a constituent. Nevertheless, we are well aware that there is widespread interest in the sub post office network and we are in no doubt about the importance and value of sub post offices and the high regard in which they are held.

Mr. Taylor: Bearing in mind the importance of the sub post office network to rural communities such as my own in Cornwall, will the Minister assure my constituents who are doubtless worried by the flotation of ideas about privatisation of post office services, that sub post offices will continue to be agents for the payment of benefits and pensions, and also car licence fees, and thus remain economically viable?

Mr. Butcher: Yes. I reiterate our commitment. In providing its services the Post Office has a statutory duty to have regard to economy, efficiency and the social needs of the United Kingdom. We have consistently stated our commitment to the maintenance of a network of sub post offices adequate to enable the Post Office to fulfil its statutory duties. That commitment stands and will be taken fully into account and respected in discussions affecting the Post Office.

Mr. Adley: I welcome my hon. Friend's comments about the invaluable service provided by sub post offices to individual communities. Does he accept, however, that in areas such as south-east Dorset, where there is considerable population growth, there is both a demand for more sub post offices and an understandable feeling among those currently running sub post offices that their revenue may be threatened? In conjunction with the Post Office, will my hon. Friend consider the possibility of increasing the duties that sub post offices may carry out so as to increase their earnings, and especially the possibility of increasing the number that may deal with vehicle licensing?

Mr. Butcher: Yes. I am pleased to respond to my hon. Friend's question. Very much on the agenda is our commitment to seek an early opportunity to extend the powers of the Post Office to enable it to offer a wider range of services in post offices. If those new services are successful, they will help to enhance the viability of the whole network. I am sure that the whole House will welcome that.

Mr. Wigley: May I press the Minister a little further on his earlier reply with regard to the statutory duties of the Post Office? Does he accept that the case for sub post offices goes further than that, as they help to sustain shops and other services in rural areas which could be hard hit if sub post offices were disbanded? Will he therefore increase the range of services and thus the throughput of sub post offices so as to sustain the general wellbeing of rural areas?

Mr. Butcher: The hon. Gentleman is entirely right. We all recognise that sub post offices have a social and community function and a cohesive influence especially in rural areas. As I have said, we hope to be helpful in that regard and to allow them to purvey more services over their counters.

Mr. Harris: I very much welcome my hon. Friend's replies. Does he recognise, however, that some smaller village sub post offices are going through a particularly difficult time and that the Post Office is resisting requests from many of them to deal with vehicle excise licences?

Will my hon. Friend seek a meeting with the chairman of the Post Office on this important point and press that more sub post offices be allowed to provide that valuable facility?

Mr. Butcher: We shall bear my hon. Friend's comments about vehicle licensing seriously in mind. I should make it absolutely clear that there is no rural closure programme, although there have been cases in rural areas where the postmaster has retired or resigned and the sub post office has been forced to close because no suitable replacement could be found. However, I will take up the point that my hon. Friend has raised.

Nicaragua

Mr. Corbyn: asked the Chancellor of the Duchy of Lancaster what export credit rating is given to Nicaragua by his Department.

The Minister for Trade (Mr. Alan Clark): The Export Credits Guarantee Department cover for Nicaragua was withdrawn in March 1979 because of the economic problems caused by the civil war and the acute shortage of foreign exchange which followed.

Mr. Corbyn: Is the Minister now prepared to reconsider implementing an export credit guarantee for trade with Nicaragua? Does he not realise that there is a great potential for exports, particularly for agricultural and forestry equipment, to Nicaragua? Does he also accept that by refusing to give export credit guarantee cover to trade with Nicaragua the British Government are in effect taking part in the economic blockade of Nicaragua imposed on that country by the United States Government?

Mr. Clark: Whether to extend credit is entirely a commercial decision for the Export Credits Guarantee Department. The present external debt of Nicaragua is $1·3 billion. Negotiations for rescheduling even part of that broke down as the Nicaraguan Government, unlike the Labour Government in 1976, refused to submit to IMF scrutiny.

Sir Geoffrey Finsberg: Does my hon. Friend accept that taxpayers of this country support his attitude and that they do not want to pump their money into the drain that is Nicaragua?

Mr. Alan Clark: I am grateful for my hon. Friend's support. Naturally, we hope that in the fullness of time Nicaragua and other South American countries which do not go along with IMF requirements will come into line. There is trade potential. However, we could not enter into that trade while it would be imprudent and profligate to do so.

Manufactured Goods

Mr. Dixon: asked the Chancellor of the Duchy of Lancaster when he next intends to meet the Confederation of British Industry to discuss the trade deficit in manufactured goods.

Mr. Kenneth Clarke: My colleagues and I meet the CBI from time to time. I have no plans for a special meeting on this subject.

Mr. Dixon: Will the Minister call an urgent meeting with the CBI to say what the Government intend to do


about our manufacturing industry before there is none left, bearing in mind that when the Tories were elected in 1979 there was a surplus of £5 billion in the trade in manufactured goods, which was turned into a deficit of £8 billion this year? Does the Minister believe that the shipyard workers, the miners and all those who have been thrown out of work in the manufacturing industries should be employed selling ice cream cornets or something like that? Is it not about time that the Government took seriously the situation in manufacturing industry in the northern region, where there was a fall in investment in manufacturing industry between 1979 and 1984 of more than 42 per cent.? Why will he not take the matter seriously?

Mr. Kenneth Clarke: I am delighted by the fact that manufacturing output has risen so sharply since the bottom of the recession. It has risen by 16 per cent. Manufacturing investment is up by 20 per cent. and we are holding our share of world trade in manufactured goods. The CBI forecast for the immediate outlook for manufacturing exports and manufacturing industry is the most optimistic that we have seen for years. I do not believe that the particular figure of the deficit in trade of manufactured goods referred to by the hon. Gentleman is particularly significant. It is one of many economic indicators. It is seized upon by the Opposition only because it is one of the few non-encouraging figures that they can find among a plethora of other signs which show that the whole British economy, including British manufacturing industry, is doing very well indeed.

Mr. Waller: Is my right hon. and learned Friend aware that the CBI, the TUC' and all parts of industry are concerned about the risks from United States protectionism especially the diversion of trade in the textile industry? Will he use every possible opportunity to make clear to Members of Congress that as a result of such diversion of trade we would be bound to take action in the GATT round with our European Community partners, and that no one would benefit from any trade war that ensued?

Mr. Kenneth Clarke: We have made it quite clear that the British Government believe that the current trade legislation before Congress would inevitably lead to European retaliation if it was enacted. We are very concerned about the whole question and we trust that the Americans will not take improper action against our exports to that country.

Mr. Cryer: What is the current balance of trade deficit in manufactured goods with the Common Market? Is it running at last year's annual rate of £10 billion? What will the Minister do to remedy that massive balance of trade deficit? When does he think that manufacturing industry output will reach the 1979 level?

Mr. Kenneth Clarke: We are not currently in balance of payments problems. I know that Labour spokesmen, most noticeably the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersely), were forcasting a balance of trade crisis later this year on the basis of National Institute of Economic and Social Research forecasts which came out towards the end of last year. The national institute has now revised those figures. It is clear that we do not have any particular problem with the balance of trade. It is also clear that our manufacturing industry is going through a substantial and continued improvement, and the outlook has never been so encouraging since the early 1970s.

Mr. Michael Marshall: Will my right hon. and learned Friend turn his mind particularly to the problem of Japan? I support what he said about not looking purely at manufactured goods, but does he see the relationship between manufactured goods and investment and the problem that we currently face, and what can he tell us about current Government thinking about trying to get inward investment into Japan on behalf of British companies?

Mr. Clarke: The most important thing is to persuade the Japanese to continue to open up their markets both to our manufactured goods and to our services. The Government have been devoting considerable efforts to that in recent months, and must continue to do so. We are achieving some success in opening up markets to goods, in getting places on the Tokyo stock exchange and in ensuring that English companies are entitled to a fair crack of the whip when new investment in, for instance, telecommunications comes along in Japan. However, we are looking for a substantial further improvement, as I am sure are all the rest of Japan's trading partners.

Mr. John Smith: Does the right hon. and learned Gentleman not realise how appalling it is for a Minister of the Crown to describe the turnaround from a £5 billion surplus to a £8 billion deficit in the balance of trade in manufactured goods as not particularly significant? Is he aware that, as North sea oil inevitably declines in volume, and, no doubt, in value, Britain will be left hopelessly vulnerable to balance of payments problems in the future unless we build a strong manufacturing industry?

Mr. Clarke: What matters most of all is the state of our manufacturing industry, which, as I have said, is increasing output and investment and has extremely good prospects for the immediate future in world trade. I do not accept that it is right, when we look at the whole range of economic indicators, to place excess weight on any one of them. At present, the economy has a good rate of growth, low inflation and improving productivity. It is a strong economy, and a quite disproportionate emphasis is being put on that one feature. Many wealthy countries go into deficit on manufactured trade from time to time, and, taken in isolation, that deficit does not justify the weight placed on it by the Opposition. I understood their doing so in the pre-election period, hut I am surprised that it is being sustained post-election.

Mr. Dykes: As British and European manufacturing industry have many opportunities to build up an increasing share of free and fair trade throughout the world, does my right hon. and learned Friend agree that they should not, in contrast, seek the excuse of accusing far eastern countries of unfair trading and constantly send complaints to the EEC Commission, as witness the latest anti-dumping complaint that the Commission is launching on compact disc laser readers?

Mr. Clarke: This country, more than most countries, has an interest in a liberal trade regime, with free trade between countries. Our response to free trade if we are in difficulties should be to improve the competitiveness and keep down the unit costs of our products, and improve their quality. Obviously, however, on some occasions unfair trading practices arise and our interests are exposed to dumping. That includes selling below cost and other improper trading practices. It is only right that the British


Government should act promptly, and expect the European Commission to do so, when our industries are exposed to that kind of unfair competition.

Inner-city Programmes

Mr. Frank Cook: asked the Chancellor of the Duchy of Lancaster how much more will be spent in 1987–88 on his inner-city programmes in the north.

Mr. Clarke: Inner-city task forces aim to ensure a more efficient allocation and better targeting of the considerable resources already being spent in inner cities under central Government programmes.
In addition, the inner-cities initiative has been allocated £14 million for the current financial year. The seven task forces in the north — Hartlepool, Middlesbrough, Preston, Leeds, Rochdale, Doncaster and Manchester—will be able, or continue to be able, to draw on this central top-up fund.

Mr. Cook: Will the right hon. and learned Gentleman readily acknowledge that the main problem of the north is that it is work hungry—in fact, work starved? Will he acknowledge that the amount of money that he has mentioned today is no more than a flea bite in comparison with the kind of help that is necessary? Will he admit that what is needed is an allocation of real resource that will provide real work in real jobs doing real community refurbishment?

Mr. Clarke: What I have mentioned today is what the hon. Gentleman asked me about, that is, one feature of the Government's programmes to help the north and establish the basis for a strong and competitive economy there. The hon. Gentleman's constituency is within the borders of the new urban development corporation. The Government's Cleveland initiative is spending a great deal of money on cleaning up derelict land in Stockton. There are enterprise zones in the north-east of England and a substantial amount of regional grants go there. We are looking to new education and housing policies to help improve the living conditions and the preparation for work of the people who live there. All of that, together with the Government's economic policies and the creation of strong competitive industries in the north, will be the solution to the problems.

Mr. Fallon: Does my right hon. and learned Friend agree that central to the task of regenerating the inner cities of the north is the need to lift the political blight of high rates and municipal Socialili? Will he accept that the Cleveland task force and the Tesside urban development corporation are practical, non-political initiatives supported by everybody on Teesside except a few bigots in the Labour party?

Mr. Clarke: I agree with my hon. Friend's propositions. In fact, there is a high degree of support in the north for many of the things that the Government have done. The Government have responded by putting money into the Northern Development Company, which is a locally-generated intitiative of potentially great value. I agree with my hon. Friend that changing the system of business rates will be a great advantage to industry in the north and I look forward to the new arrangements for the non-domestic rate, which will be of great advantage to existing and new industry in my hon. Friend's part of the world.

Mr. Madden: Will the right hon. and learned Gentleman explain why Bradford has been left off all the lists, excluded from the partnerships and missed out of all the initiatives? Will he give a clear assurance that Bradford is not being punished or penalised because its citizens elected a Labour council? Will he do his best to persuade the Secretary of State for Trade and Industry to accept a request that I made this week for him to meet a deputation from Bradford and to visit the city so that we can discuss with the Government what they will do to help us overcome the social and economic problems that we have there?

Mr. Clarke: Whenever one of my right hon. or hon. Friends or I announce an initiative in a particular town or city, we tend to find that we are being denounced by the Labour Member of Parliament for that town because what we are doing is inadequte, and then we are denounced by Labour Members in other cities or towns who want us to set up the same sort of arrangements in their constituencies. I would be happy to consider the unexpected request from the hon. Gentleman that we look at the possibility of a task force or further assistance for Bradford. We have given considerable support to all the efforts that Bradford has made to promote tourism in the city as a major source of employment. We will certainly give every other assistance to the people in Bradford who want to improve the commercial base of the city.

Mr. Holt: May I emphasise the point made by my hon. Friend the Member for Darlington (Mr. Fallon) that the trouble in the north-east of England is endemic Socialism from municipalised power over many years? That was exemplified by the recent decision of Cleveland county council to spend £250 million of its pensioners' money on a speculative newspaper which everybody knew was bound to fail. The leader of the council justified that by saying that there was always a sum of money available for speculative ventures. However, it never has any money available to help entrepreneurs set up businesses.

Mr. Clarke: Those responsible for pension funds should use those funds for the benefit of the pensioners and exercise their judgment on solely commercial grounds to look after the interests of the pensioners and their future. That is not a matter for me. However, I accept that we have to get more people in the north-east to look at ways in which more private industry might be encouraged. We have to create a climate that will attract more inward investment and new job opportunities. We still have some municipal Socialism, less in the north-east sometimes than elsewhere, which tends to work in the opposite direction.

Mr. Gordon Brown: How can the right hon. and learned Gentleman claim that there are more resources for the regions and the inner cities when, as a result of cuts in rate support grant and regional aid, less is being spent on those areas this year? Will he tell the House and the people of the north and the inner cities how the process of urban regeneration will be assisted by a 59 per cent. cut in regional development grants this year and the biggest ever cut in regional aid—£300 billion taken out of the budget — making a total of £3 billion of cuts since the Government came to power?

Mr. Clarke: The Government allocate rate support grant according to the respective needs of authorities and according to the levels which authorities need to spend on


running their services in an economic and efficient way. The rate support grant system involves a substantial shift of resources from the south to the north. I do not believe that simply increasing rate support grant to allow high-spending councils to continue to waste money is a very significant contribution to inner city revival. Regional development grants have been reformed to make them more useful and to concentrate the resources available on the creation of jobs and on those areas where, otherwise, investment might not take place. Simply going back to spending huge sums of money on the old development grants would be wasting resources that could be better used elsewhere.

Dr. Hampson: Does my right hon. Friend accept that one of the major problems in rejuvenating northern cities has been the long-standing drift of industry to London and to the south-east and that there is real concern in the northern cities that the Channel tunnel will intensify the magnet effect of the south? Will he do his level best to ensure that a major freight terminal is established, preferably around Leeds or Bradford, with freeport status so that industry is held in the north and it can be proven that they can get access from Leeds to Lyon direct?

Mr. Clarke: One of the major advantages of the Channel tunnel for the economy of all parts of the United Kingdom will be the prospect of a direct rail link through to the European terminals. The Channel tunnel is as attractive to the north as it is to the south. The prospect of through travel from Leeds, Manchester or further north, all the way through to Milan is one of the brighter features of the whole scheme.

Manufacturing Industry

Mr. Pike: asked the Chancellor of the Duchy of Lancaster what five sectors of the manufacturing industries have suffered the worst deterioration in balance of trade since 1979.

Mr. Alan Clark: The worst deterioration in the balance of trade between 1979 and 1986 has been suffered by the following industries: motor vehicles; miscellaneous electronic equipment; pulp; paper and board; motor vehicle parts, and cotton and silk.

Mr. Pike: Will the Minister accept that his answer rather than the nonsensical answers that we have had from Ministers on the Government Front Bench earlier this afternoon puts in true perspective exactly what is happening to Britain's manufacturing industries? Will he accept that the nation has prospered in the past through our manufacturing industries and that, if we are to have jobs and employment in the future, we have to get those industries right, and that the Government must take action and not continue to accept the position in the way that they indicated earlier this afternoon?

Mr. Clark: That sort of perspective is what one gets if one looks through the wrong end of a telescope. The extraordinary backward-looking attitude of the Labour party is reflected by the fact that it always asks for the worst five sectors. Had it asked for the five best, it would have found that there was a £7·9 billion improvement and a net improvement of £2·1 billion.

Mr. Oppenheim: Would my hon. Friend like to remind some Opposition hon. Members who do not have very

long memories that manufacturing output in 1979 was lower than in 1974 and that between 1974 and 1979 the ratio of manufactured imports to exports worsened threefold?

Mr. Clark: That is correct, and it is continuing to improve as is borne out by every forecast except those that are now admittedly somewhat muted by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).

Mr. Hoyle: Will the Minister tell us when manufacturing output will reach the 1979 level? Will he also tell us what talks have taken place with the manufacturers of motor vehicles for the development of power trains in this country? Would he agree that an expansion of power trains is not only high technology but would provide employment and help to reduce the deficit?

Mr. Clark: It is not possible, and it would not be prudent, to make forecasts of the level of manufacturing exports for any given year. All the forecasts—these are from bodies other than the Government—are uniformly optimistic.

Mr. Neil Hamilton: Does my hon. Friend agree that the actions of Opposition Members on this matter are absolutely fatuous? If we were in deficit on services and invisibles they would be up in arms about that, but if every country had a Government who thought they should be in balance in every aspect of their trade the whole of world trade would be brought to a grinding halt, to the impoverishment of everybody.

Mr. Clark: That is true. As I have said, the surplus in the five best sectors greatly exceeds the deficit——

Ms. Clare Short: Tell us what the figures are?

Mr. Clark: The figures can be circulated—[Hon. Members: "Answer the question."]—I have replied to it. The figures can appear in the Official Report by the morning.

Mr. Robin Cook: How can the Minister reconcile the confidence that he and his colleagues have in British manufacturing industry with the fact that investment in manufacturing industry has declined by one fifth since 1979? Is the hon. Gentleman aware that Britain is the only member of the OECD in which plant and machinery is depreciating faster than investment in it, that our investment in civil research and development is lower than that of any other member of the OECD, and that we are training only half the number of apprentices that were receiving training in 1979? If from time to time wealthy countries go into deficit on manufactured trade, will the hon. Gentleman tell us when this trend will come to an end and when the underlying strength of our economy will be reflected in a manufactured trade surplus?

Mr. Clark: If there is a surplus in every other sector of our trading account, why is the hon. Gentleman so obsessed about one sector in which we are in deficit but which is improving?

Mr. Favell: Would it not be sensible if we stopped lumping together all manufacturing industry for the purpose of these figures? Is it not true that the majority of our manufacturers are doing extremely well and that, but for the automotive trade deficit, which during the first quarter of this year was almost £900 million, we would he in surplus? As any car purchaser knows, if only we


produced a car at the right price of the right quality on time we would not have a problem with that sector of manufacturing industry.

Mr. Clark: It is true that the manufacturing deficit in consumer goods is to a large extent the result of a series of individual choices. These choices are made on the basis of quality, price and delivery. To give an example of a sort that Opposition Members seem always to reject, all our oil exports to the European Community are absorbed by the entirety of German automotive exports to Britain.

Knitwear Industry

Mr. Tom Clarke: asked the Chancellor of the Duchy of Lancaster what assessment he has made of the future prospects for the knitwear industry.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins): The Government recognise the importance of the knitwear industry. As in the case of textiles and clothing as a whole, there has been significant new investment and a sharp rise in productivity in recent years.

Mr. Clarke: Given the loss of over 100,000 jobs in these industries over the past five years and our deficit of over £1 billion with our EEC competitors, despite us having one of the lowest unit labour costs within the EEC, why is investment inadequate, why are there so many redundancies, and why is Mackinnons in my constituency the subject of closure?

Mr. Atkins: The hon. Gentleman will know that the action that the Government are taking in respect of Mackinnons is a matter for my right hon. and learned Friend the Secretary of State for Scotland. I understand that the Scottish Industry Department has offered substantial financial support to parties who are interested in acquiring the company. The hon. Gentleman has received a reply from my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Lang), the Minister of State, Scottish Office, who has dealt with the matter at some length.

Sir John Farr: May I first congratulate my hon. Friend on his elevation, which has given a great deal of pleasure to many of my right hon. and hon. Friends and myself and, indeed, to Members on both sides of the House? We hope that he will remain on the Government Front Bench for many years to come.
I ask my hon. Friend to recognise the splendid achievement of the textile and clothing industries, and especially the textile sector, in increasing exports by 14 per cent. in the previous quarter. It should be recognised that the clothing industry increased its exports by 21 per cent. Is he able to assure the House that the United States Government are aware of the danger of the Bill that is now passing through Congress, which could be extremely damaging to the industry?

Mr. Atkins: I am extremely grateful to my hon. Friend for his kind remarks. We shall see whether they are deserved as I continue to stand at the Government Dispatch Box. The Government are taking the American Bill extremely seriously and view it as a dangerous threat to United Kingdom exports and businesses. When my right hon. Friend the former Secretary of State for Trade and Industry went to the United States recently he made

it clear to the United States Administration and Members of Congress how strongly we felt about the measure. We shall continue to take a firm view of it.

Ms. Clare Short: Is the Minister aware that the textile industry in Britain has been in long-term decline and has suffered from a wage-cutting strategy, a cut in investment and a cut in training, and that if we do not intervene it will decline further and die? Intervention is required to get investment, decent training and decent wage levels. Do the Government have any plans to make such an intervention?

Mr. Atkins: The hon. Lady's point has been answered this afternoon and on previous occasions. The industry is successful, having undergone some difficult times, as I well know from my own part of the world. Although we obviously take a continuing interest in matters affecting the textile industry, the hon. Lady's points will need to be considered.

Outer City Housing Estates

Mr. Stern: asked the Chancellor of the Duchy of Lancaster if he has any plans to encourage trading initiatives in outer city housing estates.

Mr. Atkins: The inner-cities initiative is already piloting projects encouraging trading in housing estates, and we are looking at the particular contribution community businesses in general might make to tackling urban problems.

Mr. Stern: I am most grateful for my hon. Friend's reply. Does he agree that there is a danger that the inner-city initiative could be decided purely by geography? There is as much deprivation and as much need for the sort of initiatives that we are talking about in some outer city housing estates—many of which I represent in the city of Bristol—as there is in inner city areas. Will he seek to encourage such initiatives where they are needed, rather than base them purely on geographical terms?

Mr. Atkins: I am aware of the problems of outer city areas such as those in my hon. Friend's constituency and the interest that he takes in such matters. The lessons that we learn from the inner city initiatives will be put to good use in due course in areas such as his.

Mr. Leighton: Is the Minister aware that there is a great mystery about the Government's policy on cities? He knows that city action teams and task forces have had only puny funding, hardly any of which seems to have been spent, and have had hardly any effect. Is there anything new in the Government's approach to cities? If there is, will he tell us what it is? Does he accept that, if there is to be something new and effective, it will mean more resources? Can he give us any assurance that resources will be made available?

Mr. Atkins: The hon. Gentleman has asked a number of questions. The point about the inner cities initiative is that it is an experiment to investigate whether the various initiatives that have been taken in the eight pilot areas, and now the further eight pilot areas, can come up with ways of focusing resources, money, community action and a variety of other things on areas of deprivation which need such assistance. The £14 million to which he referred, and which was the subject of an earlier question to my right hon. and learned Friend, is by way of a pump-priming


operation, because resources are already available in a number of Government schemes, adding up to hundreds of millions of pounds.

Saudi Arabia

Mr. Amess: asked the Chancellor of the Duchy of Lancaster what representations he has received regarding trade between the United Kingdom and Saudi Arabia.

Mr. Alan Clark: None. Provisional figures for January to April 1987 show a satisfactory increase in United Kingdom exports to the market.

Mr. Amess: Will the Minister take this opportunity to congratulate Yardleys of Basildon on winning substantial new orders for its products in Saudi? Will he and his colleagues tackle the French about imposing trade barriers in the form of complicated labelling requirements on aerosol sprays and the like?

Mr. Clark: I am certainly glad to congratulate Yardleys on winning further orders. Indeed, total cosmetic exports to Saudi Arabia total over £39 million. At present there are difficulties relating to labelling and the definition of standards in that market. I hope that Yardleys will take up the matter with officials in my Department, who will try to help the company to overcome the difficulties.

Mr. Dalyell: When Shorts of Belfast exported Blowpipe missiles to Saudi Arabia, did the end user certificates reveal how many of those Blowpipe missiles found their way to Afghanistan?

Mr. Clark: The disclosure of end user certificates is something that is not—[Interruption.] It has been the practice of Governments not to make public information relating to end user certificates — [HON. MEMBERS: "Reading."] I am reading from my own answer, which was in the Official Report yesterday in reply to a question by the hon. Member for Monklands, West (Mr. Clarke).

Debt Registers

Mr. Kirkwood: asked the Chancellor of the Duchy of Lancaster if he is satisfied that individual liberties are sufficiently protected in the provisions governing national debt registers held by commercial credit agencies.

The Parliamentary Under-Secretary of State for Corporate and Consumer Affairs (Mr. Francis Maude): Yes, Sir. The Consumer Credit Act 1974 gives an individual the right to see any file held on him or her by a credit reference agency and to correct any false or misleading information.

Mr. Kirkwood: Why did the Department resist the opportunity that I gave them in my private Member's Bill last Session to give people unfettered access to information held manually by credit reference agencies? Why did the Government indicate, through the Home Office, that they would not be willing to include the Department within the scope of that Bill, which is now an Act?

Mr. Maude: The hon. Gentleman will understand that I have been at the Department of Trade and Industry for only three weeks, and that I am certainly not able to answer for the Home Office.

Mr. Janner: During the next three weeks, will the Minister be kind enough to follow up the question asked

by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood)? The personal access provisions of the Data Protection Act come into force in November. It is wrong that access is given only to automatically processed data and not to data held by traditional or other means. Will the hon. Gentleman be good enough to undertake to look into that matter while he remains with the Department?

Mr. Maude: The hon. and learned Gentleman is energetic and ingenious, and I really cannot believe that he is not capable of pursuing the matter in his own way with the Ministers responsible.

Bankruptcies

Mr. Ashdown: asked the Chancellor of the Duchy of Lancaster what is the latest available figure for bankruptcies among small businesses.

Mr. Kenneth Clarke: The provisional estimate of the number of bankruptcies in England and Wales for the first five months of 1987 is 2,940. Almost all of these related to insolvent individuals and we estimate that between 70 and 75 per cent. were unincorporated businesses.

Mr. Ashdown: Does the Minister realise that many have severe doubts about the accuracy and comprehensiveness of those figures—particularly the National Federation of Self-Employed and Small Businesses, which believes that the Government need much better figures to judge bankruptcies and the reasons for them, and that that could be done without increasing the burden on small businesses? Will the Minister take steps to improve those figures to ensure that the start-ups of today are not the bankruptcies of tomorrow?

Mr. Clarke: I prefer my figures to other people's. However, I am happy to examine what the National Federation of Self-Employed and Small Businesses says about the figures and to consider suggestions for improving them. My figures show a fall in the number of bankruptcies. In addition, any bankruptcy figures have to be set against the very encouraging increases in the number of new businesses and in the number of self-employed people.

Mr. Andrew MacKay: Does not the whingeing of the hon. Member for Yeovil (Mr. Ashdown) demonstrate the reason why the Liberals did so badly at the general election? The electorate is pleased that we have a very large number of new small businesses setting up and relatively few bankruptcies. The public are realistic enough to recognise that there will always be some bankruptcies, which is quite healthy in a free economy.

Mr. Clarke: Last year's VAT registration figures show a net growth of 20,000 new businesses, and there has been a growth in the number of new businesses every year since 1979. I agree that it was rather off-beat of the hon. Member for Yeovil (Mr. Ashdown) to ask a question about bankruptcies, but that is rather typical of the Liberal party's approach.

Mr. Allen McKay: Will the Minister confirm that when the poll tax is introduced there is to be a revaluation of business property, which will result in a tremendous increase in the rates on those premises? [Interruption.] No, business premises. In many instances the revaluation will increase the rates, and that will lead to further bankruptcies.

Mr. Clark: Like my hon. Friends, I am intrigued by the wide-ranging nature of questions to the Department of Trade and Industry. However, because of my interest I pay close attention to what is being proposed for business rates. We are, indeed, due for a revaluation of business rates, which is essential to bring the valuations up to date. However, I assure the hon. Gentleman that his constituents' interests are very much served by the proposals. The updating of valuations and the transfer to new national non-domestic rates will be of great advantage to large parts of northern England and its industry.

Aid and Trade Support

Mr. Page: asked the Chancellor of the Duchy of Lancaster what calculations are made of the value of the additionality when considering applications for aid and trade support.

Mr. Alan Clark: The aid and trade provision is used to counter the tied aid credit practices of other Governments. Offers are made where aid is appropriate as an element in securing the business for the United Kingdom, and in making such calculations due regard is paid to a number of factors, notably the maintenance of employment in the United Kingdom and the likelihood of follow-on orders.

Mr. Page: I thank my hon. Friend for pointing out the wide benefits that flow from the aid and trade provision. Has he seen that same point elaborated by Hawker Siddeley's paper "Harvest for Britain" on the scattered diesel programme for Indonesia? Is it not a fact that countries such as France, Japan and Germany have increased their aid and trade provision, or its equivalent, to four to 12 times ours to secure those same wide benefits? If my hon. Friend agrees with me, will his Department push to increase our aid and trade provision programme, so that this country can also enjoy those wide benefits, such as jobs and prosperity?

Mr. Clark: I very much agree with the thrust of my hon. Friend's comments. I saw the Hawker Siddeley report and thought it extremely valuable. Since 1978 there has been some £460 million of ATP, which has secured 121 projects worth more than £2 billion. Part of the reason for the difference between our provision and that of some of our competitors is the different standards of assessing project merit applied by the designating bodies in those countries. I have no doubt that my hon. Friend either has seen or will shortly read the report of the Select Committee on Foreign Affairs on this subject.

Mr. Wells: On the question of the recent report of the Select Committee on Foreign Affairs on bilateral aid, will my hon. Friend take account of the recommendation that the ATP should be separately funded, so that we can at least try to equal the efforts made by our competitors and, therefore, allow British businesses to compete on fair tents with their overseas competitors?

Mr. Clark: I do not know whether by separate funding my hon. Friend means separating the ATP from the bilateral aid programme under which the developmental value of projects is one of the primary considerations. We will respond in due course to the Select Committee. We are very much aware of the feeling of the whole House on this subject.

British Telecom

Mr. Beith: asked the Chencellor of the Duchy of Lancaster when he next plans to meet the chairman of British Telecom to discuss consumer interests.

Mr. Butcher: My right hon. and noble Friend met the chairman of British Telecom last week. Consumer interests were amongst the matters discussed. My right hon. and learned Friend also expects to meet the chairman soon.

Mr. Beith: Will the Minister tell the chairman that the results of the consumer survey and the report of the official monitoring body demonstrate that British Telecom's privileged monopoly position is allowing it to treat its consumers appallingly badly? Is the hon. Gentleman aware that, during my time as a Member of Parliament, I have never heard so many complaints about the telephone service and that in my consitutency the public telephone call box service is on the verge of collapse because it is not adequately maintained, the money is not emptied from the boxes and the service is disgraceful?

Mr. Butcher: This Government's legislation has beefed up consumers' rights to make representations through the Director General of Telecommunications. It is for the director general, if he finds abuse of that monopoly position, to request a change in licence conditions. I should have thought that that would be welcomed by both sides of the House. It would be unwise for me to comment at the moment on the survey. It will go to Oftel's director general. I understand that the survey was carried out between 6 and 10 March when BT was still affected by the aftermath of the National Communications Union strike action.

Mr. Hayward: Are not people forgetting the problems faced by consumers, both individual and business, before BT was privatised? Was it not common for consumers to wait 26 weeks for any particular piece of equipment before privatisation and liberalisation?

Mr. Butcher: Yes, there were immense difficulties pre-privatisation, especially for business users. Our programme of liberalisation of the supply of peripheral equipment to those users had a great effect. It is interesting to note that, by comparison with one of our major competitors, Germany, the cost of our business lines per business user is now significantly better than that for German business men. We should welcome the fact that alternative network provisions for business users are now being completed through the network supplied by Mercury.

Mr. Allen: When the Minister next meets the chairman of British Telecom, will he raise with him the subject of blind and disabled persons and demand guarantees that they will not be charged for directory inquiry services? Will he then make that statement public?

Mr. Butcher: BT's licence allows it to charge for directory inquiries. However, BT must provide services to blind and disabled persons free of charge or with reasonable compensation. We bore this matter very much in mind when framing the original legislation and enshrining the rights of the hard of hearing.

Mr. Aitken: Does my hon. Friend understand that the OFTEL organisation does not seem to many people to be doing a vigorous enough job in defending the interests of


consumers against the monopoly that currently exists? Will my hon. Friend consider two areas of concern? The first is the apparent discrimination against Mercury customers, and the other is the discrimination against small independent engineers who wish to fit all sorts of extension devices to customers' equipment, but are unable to do so because of British Telecom's stranglehold on the master switches, which is apparently defended at the moment by OFTEL. That is a totally unacceptable situation.

Mr. Butcher: The Director General must publish an annual report and it is on that basis that we make judgments on his efficacy. My hon. Friend has raised two serious matters. When we next meet the Director General of OFTEL, with whom we have periodic meetings, I shall ensure that those two items are on the agenda.

Mr. Flannery: Is it not a fact that, despite what the Government say and all the gimmickry, the telephone system is now worse than it was? [Interruption.] At lunch time I had to telephone on three occasions and had difficulty in getting the number that I wanted. Everybody to whom I speak says that that is happening and that telephones are giving small tinkles and rings at times when nobody is ringing. Why will the Government not admit that something is wrong, because only when they admit that something is wrong will they try to set it right?

Mr. Butcher: Waiting lists for telephones numbered 200,000 prior to privatisation. That is now almost eliminated. On the question of business use, I can recall from vivid personal experience that if one wished to get a modem from the old BT network one had to put one's name down and was privileged to receive it within five or six months. We do not say that all is universally well with BT. We say that it should be held to account and where it abuses its monopoly position we have given the DG OFTEL powers to request variations on licence conditions, which, in my view is an effective sanction.

Mr. Grylls: Does my hon. Friend agree that any supplier or company as large as BT, with still a dominant market share, will attract a good deal of criticism, because that is what people are like and what happens? However,

as my hon. Friends have said, it would be unwise not to recognise that there has been a huge improvement throughout the service and a massive investment programme in British Telecom of thousands of millions of pounds, which has benefited large and small firms up and down the country and which, to a large extent, has been responsible for creating many new jobs, which we all welcome.

Mr. Butcher: My hon. Friend is exactly right. There has been a massive investment programme. Since 1983 an additional 2 million exchange lines have been installed. Our consumer and business expectations are increasing and that is exactly right. However, through the regulatory and other mechanisms, we must ensure that BT delivers according to customer preferences.

Mr. Alan Williams: Instead of quoting the odd selective statistic, why does the Minister not force British Telecom to publish the comprehensive consumer figures that it used to publish when it was in public ownership? Will he now admit that British Telecom has become a sick private joke? Its enormous profits come solely from the fact that it uses its monopoly power to milk the domestic consumer, and it has shown itself to be completely incapable of operating a public telephone kiosk system. Does the Minister condone the latest abuse of its monopoly power—the imposition of blackmail premium charges on those of its customers who have the temerity to want their telephones repaired in a reasonable time?

Mr. Butcher: The right hon. Gentleman's comments had more to do with his dogmatic antipathy towards privatisation than with the facts. During the past three years controlled telephone prices have declined in real terms by just over 8 per cent., thanks to the RPI minus three formula. I do not recall that happening when British Telecom was in public ownership. Last November's changes resulted in an average reduction of 0·3 per cent. For the average domestic consumer OFTEL estimates an increase of 1·9 per cent., which is still a fall in real terms. The right hon. Gentleman went right over the top. In empowering the regulators to call for precisely the sort of information that he defined, we gave them the teeth to keep the public better informed.

Questions to Ministers

Mr. Tam Dalyell: On a point of order, Mr. Speaker, arising from questions. Was it within your hearing that, in the course of his perfectly courteous reply to question 10, the Minister gave it as his personal opinion? On a subject as important as missiles exported to Saudi Arabia finding their way, without the use of end user certificates, to countries such as Afghanistan, surely we need a Government reply rather than a personal reply, especially in the light of today's news that the Russian Government have officially complained to Sir Bryan Cartledge, the British ambassador in Moscow, on this subject.

Mr. Speaker: Order. I am not responsible for answers that are given from the Front Bench, or for questions. I am afraid that I cannot adjudicate on that.

Statutory Instruments, &c.

Mr. Speaker: With the leave of the House, I will put together the two motions on statutory instruments.

Mr. Nigel Spearing: On a point of order, Mr. Speaker. Am I correct in saying that if you put the motions separately, as I ask you to do, and if 20 hon. Members rise when the first one is moved, the debate will be taken on the Floor of the House instead of in Committee? Is that a possibility?

Mr. Speaker: Let us see how we go. I will put them separately——

Mr. A. J. Beith: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. It is perfectly possible to divide on these matters.

Mr. Beith: Further to that point of order, Mr. Speaker.

Mr. Tony Marlow: On a point of order, Mr. Speaker.

Mr. Speaker: Order. I cannot listen to two at a time. I call the hon. Member for Berwick-upon-Tweed (Mr. Beith).

Mr. Beith: Further to that point of order, Mr. Speaker. Would it not be unfortunate if the important point raised by the hon. Member for Newham, South (Mr. Spearing) led the House to believe that if a debate in Standing Committee was resisted the matter would automatically come to the Floor of the House? Is it not the case that there is no guarantee that the matter would ever be brought to the Floor of the House?

Mr. Speaker: That would be a matter for the Government, but the hon. Member for Newham, South (Mr. Spearing) is correct. If 20 hon. Members stand in their places, the matter could only be dealt with on the Floor of the House, albeit at the Government's discretion.

Members' Dress

Mr. Tony Marlow: On a point of order, Mr. Speaker. Yesterday, you said to the House that hon. Members should wear jackets and ties. When the hon. Member for the revolutionary tendency and Islington, North (Mr. Corbyn) asked his question today, he was not wearing a jacket or a tie. Of course, he had marked question No. 3 on the Order Paper. Do you have any discretion as to whether to call a right hon. or hon. Member who has a question on the Order Paper?

Mr. Speaker: I have no discretion if an hon. Member has a question on the Order Paper. I must call it if he is here.

Ms. Clare Short: Further to that point of order, Mr. Speaker. I am very disturbed by this series of points of order about the clothes people wear. We are not in school. This place might imitate a public school, but it should not. We are accountable to our constituents and to the public, and we should be responsible for our own clothing. People can then make judgments about us. It should not be for you, Mr. Speaker, to enforce the wearing of the sort of uniform that some people in the House expect us to wear. It is ridiculous.

Mr. Speaker: I rather agree with the hon. Member for Birmingham, Ladywood (Ms. Short). In reply to the numerous points of order raised on this matter I have said that, since this Chamber is air-conditioned, my concern is for the health of hon. Members. If hon. Members come in without jackets, they are quite likely to get a cold. I had a bad cold last week.

STATUTORY INSTRUMENTS &c.

Motion made, and Question put, forthwith, pursuant to Standing Order No. 101 (Standing Committees on Statutory Instruments &amp;c.),
That the Urban Development Corporations (Financial Limits) Order 1987 be referred to a Standing Committee on Statutory Instruments. &amp;c.—[Mr. Alan Howarth.]

Not fewer than twenty Members having risen in their places and signified their objection thereto, MR. SPEAKER declared that the Noes had it.

Ordered,
That the draft Job Release Act 1977 (Continuation) Order 1987 be referred to a Standing Committee on Statutory Instruments, &amp;c.—[Mr. Alan Howarth.]

Orders of the Day — Finance Bill

Order for Second Reading read.

The Chief Secretary to the Treasury (Mr. John Major): I beg to move, That the Bill be now read a Second time.
As the House will recall, many of the measures announced in the Budget in March were approved in the Finance Bill passed by the House before the general election. They included the 2p reduction in the basic rate of income tax and in the small companies' corporation tax; extra help for the blind and the elderly; a package of measures to help small businesses with their VAT liabilities; and further reforms of inheritance tax. All those were welcome measures to the majority of hon. Members.
The Bill before us today completes the proposals contained in my right hon. Friend's Budget. Both that Budget and the two consequential Finance Bills have been set against the most favourable economic climate we have seen in this country for many years. It is a background of steady and sustained growth, of low inflation; and of falling unemployment. It is also a background which has enabled my right hon. Friend in one year to cut taxes, to cut borrowing, and, at the same time, to increase resources for priority services by £4¾billion. That combination of events represents a remarkable tribute to my right hon. Friend's stewardship of our national accounts.
However, I am acutely conscious that the House debated the state of the economy, and the latest economic indicators, only last Thursday and I shall deny myself the pleasure of reopening that debate, enticing though the prospect may be, particularly because the Bill contains a number of important matters to which I want to turn without delay.
Before I do so, I should like to extend my congratulations to the hon. Member for Dagenham (Mr. Gould) on his success in the shadow Cabinet elections today. I am not at all sure whether that means that the hon. Gentleman will leave his present responsibilities for Treasury matters or perhaps assume those responsibilities in an enhanced capacity. In either event, I congratulate him unreservedly on his election success today.

Mr. Bruce Grocott: Will the Minister give way?

Mr. Major: I shall do so a little later.
Clauses 1 to 17 reintroduce our proposals for tax relief for profit-related pay. The detailed provisions follow very closely those in the earlier Bill, although we have taken the opportunity to incorporate the Government amendments that were put down on this subject before the election. We have also made other minor detailed changes and improvements in response to representations.
Essentially, however, the proposals are the same and they represent a significant initiative. They form an important, and I believe imaginative, element in our strategy to improve the supply performance of the economy. The working of the labour market remains one of the greatest weaknesses in this country. Its rigidities are well known and well acknowledged and they are a major obstacle to the continued strengthening of our economic


performance. And all too often the labour market has been dominated by the outdated concept of "them and us". Profit-related pay can play an important part in tackling that obstacle precisely because it underlines the shared common interest in building better and stronger businesses.
In recent years there has been a rising interest in profit sharing of all types. There has been a growing take-up of schemes for employees to acquire shares in the companies in which they work, and I have little doubt that the take-up has been stimulated by the tax incentives available. But, at the same time, there has been a developing interest in cash-based profit sharing. That is what we now call profit-related pay, an arrangement where a part of employees' pay is linked to the profit record of the business. Hitherto there have been no specific tax incentives for this type of profit sharing, but this Bill remedies that omission. It does so particularly because the benefits of such an arrangement are valuable and far-reaching—probably more so than for share-based schemes. Employers, employees and the economy at large all stand to gain from its wider spread.
For the employer it means a more committed work force, with better incentives to profitability and productivity. It means that if times are difficult, and profits fall, part of the necessary strain may be taken by a temporary fall in pay, perhaps as an alternative to redundancies. That extra flexibility helps to make output more secure. It means something else as well—more certainty and less caution about hiring extra labour to increase output when prospects look good. In short, profit-related pay is part of successful management.
Nor are the benefits simply for the employer. For the employee, profit-related pay means a direct stake in business success. It means higher pay if that has been earned by higher profits, and if business conditions are difficult it means greater job security.
The proposed tax relief from this scheme can be extremely valuable. For a man on average earnings with 20 per cent. of his pay as profit-related pay — the maximum that will be eligible for tax relief — it is equivalent to 4p off the basic rate of income tax. Not only is this of major benefit to employees; it also provides employers with a very useful and practical tool to help them to introduce the scheme. Nor are the benefits limited to the businesses in which the schemes are introduced. The whole economy gains as well, because a broad spread of profit-related pay schemes means higher productivity, higher output and employment from which everybody stands to benefit—not least those who are at present unemployed and who have a special interest in that success.
Even without the benefit of tax relief, a number of firms have already seen the value of profit-related pay and have introduced their own schemes. It is quite clear that they have found them valuable. The proposals in this Bill provide a substantial incentive to employers and employees to build on that initial success.
The detailed provisions in the Bill represent more than a year's consultation with a wide variety of interests. Before tax relief can be given it will be necessary for profit-related pay schemes to meet certain basic statutory requirements and to be registered with the Inland Revenue in advance of their first profit period. We believe that we

have struck the right balance between the regulation that is necessary with any tax relief and flexibility for employers to tailor schemes to the particular circumstances of their own businesses. We have aimed to keep the criteria for registration as simple and flexible as possible. In particular, that should help smaller and unincorporated businesses, which should be able to benefit from profit-related pay in the way that they cannot at present benefit from share-based schemes.
It is clear from what I have said that profit-related pay offers a major opportunity further to strengthen our economic performance, and I hope that all employers and managers who are not already doing so will think now, without delay, about how to introduce a scheme that will qualify for the tax relief.
It is exceedingly encouraging that already more than 20,000 employers have contacted the Inland Revenue to establish their interest in the details of these proposals and to order copies of the guidance notes that will be published later this year. I hope therefore that the whole House without exception will want to see this measure on the statute book as soon as possible.
I turn now to the largest group of clauses in the Bill—clauses 18 to 57—which contain important and far-reaching changes for private pensions. Again, the legislation is substantially the same as that proposed in April, although it has been amended to repair certain technical defects that have become apparent. Our proposals have two main objectives — first, to widen individual choice and to encourage job mobility; and, secondly, to ensure a fairer deal for the taxpayer.
I suspect that there will be general agreement that it is desirable to widen the coverage of private pension provision, and much has already been done in this regard. Many employers have established occupational pension schemes for their staff, with the help of generous tax reliefs. At present, more than 10 million people are currently members of occupational schemes, of which all but about 1 million are contracted out of the additional component of the state scheme. However, to make clear the scale of private pension provision, I should perhaps add that an increasing number of people—currently about 5 million—are already receiving pensions from occupational schemes, and, as the family expenditure survey recently revealed vividly, there has been a steady improvement in the average real income of pensioner households over recent years. The success of occupational schemes has played a material part in that.
However, more can be done. There are still some 10 million employees who are not in an occupational scheme and who make no private provision for retirement. A central feature of our strategy is to bring private pensions within the reach of these employees for two reasons: to provide them with a pension of their own, and to increase their independence of the state. We propose to do that through the new personal pensions, which will be available to all employees who are not in an occupational scheme; to the minority of employees who choose to opt out of their occupational scheme; and to the self-employed.
Clauses 18 to 57 and schedule 2 of the Bill introduce the tax regime for these schemes, which will be available from next January. The legislation has no novel ingredients but is based on the present, broadly similar, retirement annuities provisions enacted over 30 years ago. In addition to being brought up to date, the new measures also incorporate a number of new features which have been


widely welcomed. The Social Security Act 1986, which I recall with some affection, enables employees to contract out of the additional component of the state scheme through taking a personal pension. Clause 42 provides the necessary tax procedures to achieve that result.
We propose other improvements in the rules in order to make personal pensions more attractive. In particular, we shall allow people to have more than one personal pension plan, which will enable risks to be spread and choice to be greater. The amount of contributions will be limited, but there will be no limit on the benefits which such schemes can provide.
In addition, clause 20 enables a much wider range of pension providers to establish personal pension schemes. As well as insurance companies and certain friendly societies, the field in future will be open to banks, building societies and unit trusts; and, in response to representations, all registered friendly societies—not only those with income above a certain level—will be able to offer such schemes.
The House will also be aware that the Bill contains provision to allow members of occupational schemes to make additional voluntary contributions to a pension plan that is completely separate from their employer's scheme, up to the tax approval limits on contributions and benefits. That development has been widely welcomed and, taken together with the other changes, will dramatically increase the choice of how to provide for retirement.
A further purpose of our reforms is to remove, as far as possible, the pension obstacles to job mobility. The House will be well aware of the early leaver problem—the person who changes jobs in mid-career and whose pension expectations are, in consequence, much reduced. There is no quick and easy solution to that problem. However, the very existence of the new pension opportunities will have the additional advantage of greatly reducing its worst impact. Personal pensions and freestanding additional voluntary contribution schemes, together with much greater transferability of pension rights from the Social Security Act 1985, will mean that, when someone changes his job, he will be able to take some or all of his pension with him. That is clearly a great improvement.
The changes that we have proposed do not increase the already generous tax regime for retirement provision, but they extend it potentially to every employee. I believe that these reforms will greatly improve the pension position and the freedom of choice of every employed and self-employed person in this country.
However, the improvements that we propose can be justified only if the tax reliefs for pensions are not abused. We have felt it necessary to impose some limited restrictions, to guard against misuse of the tax reliefs, particularly by a small number of very high earners. The legislation is contained in schedule 3. The tax rules for pensions were never intended merely as a tax-sheltered medium for investment generally, with scope for the postponement—and, for lump sums, complete elimination—of a tax liability.
These restrictions will have no impact whatever on the vast majority of pension scheme members. For ordinary working people, the scope for abuse has never been available. For a few highly paid people, however, the new rules will ensure that the tax reliefs are used only for their originally intended purpose.
I have seen suggestions in recent days that these changes will restrict job mobility, particularly among senior executives. I understand the argument, although I believe that this would generally be only one of many factors which influence the decision to move.
In response to representations, however, we have amended our proposals in one important respect. We originally proposed that new members of occupational schemes should be permitted to have maximum lump sum benefits after as little as 20 years only if they obtained maximum pension benefits after the same period. In all other cases, maximum lump sums could be obtained only after 40 years. It was put to us that this was somewhat harsh on an individual with less than 40 years' service whose pension was boosted, but not completely up to the maximum possible. In such cases, it was argued, it should be possible for the lump sum to be boosted to the same extent. We have accepted that point and the legislation in schedule 3 has been amended accordingly.
The measures that I have outlined comprise some of the main changes in a continuing process of pensions reform initiated by my right hon. Friend the previous Secretary of State for Social Services more than three years ago. The proposals in the current Finance Bill build on and extend the changes made in recent social security legislation, and I believe that they will provide a better pensions deal for millions of employees and for the self-employed in this country. I hope that they will be generally welcomed by the House today and during the remainder of the Bill's passage.
There are a few changes to the pre-election Bill which I should mention to the House. Clause 70 deals with the tax treatment of Lloyd's reinsurance to close arrangements. It reintroduces in revised form the proposal in clause 58 of the April Finance Bill. The House will recall that the need for legislation arises because of a defect in the present tax law. As matters stand, the Revenue does not have an effective locus for examining the justification for reinsurance to close and, if necesary, adjusting it for tax purposes. If nothing were done, Lloyd's underwriters would be in the unique position of being able to determine the amount of a tax deduction without effective review by the inspector of taxes.
When my right hon. Friend the Chancellor announced these proposals in his Budget speech, he said that there would be immediate consultation with Lloyd's on the details of the legislation. Those discussions have been extensive and thorough. We have considered Lloyd's representations very carefully indeed, recognising there are two considerations to be satisfied. The first is that there must be an effective system for ensuring that the amount of the reinsurance premium can be properly scrutinised for tax purposes and adjusted where necessary. This is clearly right in principle and necessary to achieve fairness to other taxpayers, whose claims for tax deductions have to satisfy scrutiny by the tax inspector. The second consideration is that the system must be fair to Lloyd's members and take account of the special features of Lloyd's.
Lloyd's has very properly made it clear from the outset and throughout the discussions that it recognises that there should be a proper system for ensuring that tax deductions for reinsurance to close are not excessive, hut it expressed concern about the original wording, which treated reinsurance to close as a provision. The concern was directed at the principle of equating reinsurance to close premiums paid by one syndicate of Lloyd's members


to another syndicate with the provisions for outstanding liabilities made by insurance companies. The revised clause meets Lloyd's anxieties about the form of the original clause.

Mr. Robert Adley: I am not a name at Lloyd's, but I am considering becoming one. Is my right hon. Friend aware that the view taken of the agreement that he has announced differs markedly between the "establishment", if I may so put it, at Lloyd's and a number of individual underwriting agencies? My right hon. Friend used the word "unique" to describe the situation of Lloyd's names. Does he accept that the contribution made by Lloyd's is also unique and depends entirely on people's willingness to submit all that they own or possess to certain risks? Before commending even the amended Bill to the House, will my right hon. Friend please take care to ensure that it will not so damage Lloyd's that large numbers of names resign their membership, thus depriving the country, not to mention the individual names, of a unique organisation?

Mr. Major: I certainly agree with my hon. Friend about the contribution of Lloyd's. Lloyd's has certainly made a substantial contribution. It is a major force in world insurance markets and is a substantial contributor to invisible exports. It is also a major contributor to London as a world financial centre. It would be no part of our policy to damage the reputation of Lloyd's or to ensure that it was treated anything other than fairly. We believe that the proposed arrangements in the Bill will strike a fair balance between the interests of the taxpayer and the interests of Lloyd's and the members of the syndicates.
We believe that the revised clause meets Lloyd's anxieties about the form of the original clause. It now provides a free-standing test for the tax deductibility for reinsurance to close. The test is that the figure must be a fair and reasonable value of the liabilities, designed to produce neither a profit nor a loss to the Lloyd's members who assume the outstanding liabilities.
In its revised form, the clause meets the twin objectives I set out a moment ago. It meets the objective of ensuring that the tax deductibility of reinsurance to close can be properly reviewed by the tax inspector, but it does so in a way which is fair to Lloyd's. It takes account of the special features of Lloyd's reinsurance to close arrangements, and meets its concerns about the proposals in their original form.
There is another important modification we have introduced that I wish to mention.

Mr. Dennis Skinner: Before the Chief Secretary leaves the point about Lloyd's, what would he say to the man in the street who has no interest in Lloyd's, who has found himself out of a job, who has not been rescued by the Government, who has not been guilty of any fraud or crime like those in Lloyd's, who has not been part of a process in which £40 million has been fiddled and in which the fraud squad has not been involved because of the self-regulation applying at Lloyd's which is their system of law, when he found that the Tory Government were proposing to change the law to suit those people who have done nothing whatsoever about the massive fiddle that has taken place at Lloyd's to induce the Inland Revenue—the taxpayer—to provide sums of money as a

means of rescue? Would it be fair to say that the man in the street would say, "I thought that this Government didn't believe in throwing money at things"? Today the Government are throwing money at Lloyd's and the names involved.

Mr. Major: The hon. Gentleman frequently see things that others cannot. On this occasion he has done so again.
With regard to the first part of the hon. Gentleman's remarks, I would say to the mythical man in the street that much of what the hon. Gentleman has said has nothing whatsoever to do with the contents of this Finance Bill. I would say to the hon. Gentleman and to his mythical friend in the street that the legislation that we propose tightens the present position. It is effective. The test that we propose is fair to the taxpayer and to Lloyd's. It is wholly misleading of the hon. Gentleman to suggest otherwise.

Mr. Skinner: The Minister is fiddling the figures to bail them out using taxpayers' money.

Mr. Major: I said a moment ago that the hon. Gentleman can always see things that others cannot. If he had been at the walls of Jericho when they fell, he would have blamed the Government for poor maintenance.
We have introduced another important modification to the Bill's provisions on the taxation of companies' capital gains. As the House will know, we received a number of representations about the impact of this change on the life assurance industry. The particular point of concern was whether the change to charging gains at the main corporation tax rate should apply to the gains which life assurance companies earn for their policyholders. We considered this issue very carefully and concluded that we needed to take a general look at the tax arrangements for life assurance which have developed piecemeal over a long period.
There will be a full opportunity for the life assurance industry and other interested parties to contribute to the review. In an area as complex as this, the exercise is bound to take time but the Inland Revenue will be initiating consultations as speedily as possible. In the meantime, we have decided that the tax rates on gains earned for policyholders should remain at 30 per cent. pending the outcome of the review.

Mr. Jerry Wiggin: It can be validly argued that clause 75 is retrospective taxation on all life insurance policyholders. In the light of his welcome assurance that the industry will now be consulted on the entire taxation process, will my right hon. Friend give further thought to postponing the introduction of clause 75 until the review has taken place?

Mr. Major: I am afraid that I cannot give my hon. Friend that assurance. The proposition that I have just put before the House is very limited, and I fear that I am unable to go further on this occasion.

Mr. Terence Higgins: I raised this matter on Second Reading on the pre-election Bill. But will my right hon. Friend consider carefully the point about retrospection? Does he accept that there ought not to be any element of retrospection when changes of this kind are made?

Mr. Major: I shall bear in mind what my hon. Friend has said. However, I cannot add anything to what I said a moment ago.
Although the Bill is substantially unchanged, I should mention briefly four new clauses.
Clause 71 is simply designed to put it beyond doubt that tax relief for losses arising from capital gains indexation is not available against income where the loss arises on a withdrawal from a building society account.
Clause 80 is similarly designed to protect the spirit of existing legislation, and makes it clear that capital gains rollover relief is not available for gains or the disposal of interests in oil licences.
Clause 103 gives effect to the measure affecting fish processing ships known as Klondykers, which my right hon. Friend announced in his speech in Perth in May and which will, I suspect, be particularly welcomed by Scottish fishermen. The clause will give a useful new relief from duty for stores imported for use on those factory ships. Without that relief, there is a risk that the ships, which provide a significant market for United Kingdom fishermen, would stop using British ports.
Clause 102 supplements existing legislation in relation to fees and charges for services and facilities provided by Government Departments.

Mr. Michael Grylls: Will my right hon. Friend be able to think again about the original clause 57, which introduced retrospective legislation with regard to the overturning of cases when the view of the law before had been widely accepted in one way but the Revenue accepted it in another way? Is not that sort of retrospection very dangerous and rather unconstitutional? In my view, we should not be doing it.

Mr. Major: I shall certainly reflect on what my hon. Friend has said. However, in view of the nature of his question, it would be unwise for me to do more than reflect on it for the moment.
Clause 102 supplements existing legislation in relation to fees and charges. It enables Ministers to extend by order the range of matters that they may take into account by setting such charges in order to implement the normal policy of full cost recovery.

Mr. Dafydd Wigley: Will the Minister confirm that the powers given by order can in no way extend the number of subject areas in which fees can be charged, and that they do not open a Pandora's box?

Mr. Major: No doubt we shall debate that point in Committee, which is the appropriate time for us to do so.
Finally, I should like briefly to mention a few minor changes to the Bill. We have made a number of improvements to the pay and file provisions in response to representations from business groups. Again in response to representations, we have made a change to clauses 67 and 68 which end the present over-generous treatment of tax credit relief for foreign withholding tax paid on interest on bank loans. This change will have the effect of doubling the length of the transitional period for loans already in existence on 1 April.
There are also a couple of amendments to the Finance Act passed before the election. Clause 97 fulfils our undertaking to extend the inheritance tax interest waiver facility created by section 60 of the Act to estate duty and pre-1985 capital transfer tax.
Clause 101 and schedule 8 make technical amendments to the oil taxation provisions in sections 61 to 63 of the Finance Act. They include a measure to counter

arrangements to circumvent the petroleum revenue tax nomination scheme. That will take effect by Treasury order only if it becomes apparent that such arrangements are being made.
The measures that I have outlined, taken together with those enacted before the election, continue our strategy of reducing rates of taxation overall, while using the tax system to help the economy to function better. At the same time, we have also taken the action necessary to ensure that loopholes, which the few can exploit but which increase the taxes of the many, are closed.
In previous Finance Acts, we introduced measures to help small businesses and to spread share ownership. We are already seeing the benefits of those changes. Small businesses are now a major source of new jobs. One million were created between 1982 and 1984 alone, 1·5 million employees now hold shares in their own companies, and individual share ownership has tripled since 1979. Those positive developments are due in no small part to the encouragement that has been given through the tax system.
The two substantial measures that we have introduced today will, I believe, have a similarly dramatic effect Once employers and employees see the benefits that profit-related pay can bring—benefits that go far wider than the tax relief—such schemes will spread rapidly, just as employee share schemes have done. The new pension proposals will end the discrimination in old age, the two nations in pensions that we have had for too long—those who have occupational pensions, and those who have not. That will be a significant improvement.
The House and the country have already approved the centrepiece of the 1987 Budget—the reduction in tax for all basic rate taxpayers. The measures in this Bill complete the implementation of the measures introduced in my right hon. Friend's Budget. They further our objectives of increasing freedom and widening choice, and I commend. them to the House.

Mr. Bryan Gould: I begin by thanking the Chief Secretary for his kind remarks, and by in turn congratulating him on his appointment. Let me express the wish that he does his new job well, but not too enthusiastically.
It would be idle to pretend—as the Chief Secretary clearly did not—that this is a major piece of legislation, as the centrepiece of the Budget, as the Chief Secretary described it, has already been put in place. However, this Second Reading gives us the opportunity to pause for reflection and perhaps, for a change, to look forward rather than backwards, to the prospects for our economy over the next four years.
When we ask the question, "How is the economy likely to perform?", we must first take account of the likely development of the world economy. It must be worrying to hon. Members on both sides of the House that the prospects for that world economy are now, by common consent, rather more worrying and less favourable than they appeared even a few months ago. The substantial trade imbalances, the misaligned exchange rates and the unresolved international debt problem still pose difficulties. However, I do not think anyone need be too alarmed. No major crisis is in prospect. I would argue that the


prospects for our own economy depend very much on our own efforts rather than on the impact of the development of world economic factors.
Our economic performance will, of course, be very much influenced by where we are now, and by our recent economic history. I am afraid that that history offers little ground for optimism. In 1979–81, we broke with a postwar trend—indeed, an even more long-standing trend—of gentle but steady decline. However, we broke with it in precisely the wrong direction. Within not years but months, one fifth of our industry had been wiped out; unemployment had been sent soaring upwards, and output and investment downwards. That was clearly the consequence of extreme and avoidable mistakes of economic policy, wrought in the name of monetarism and by what I describe as the monetarist ratchet of tight money, high interest rates and an over-valued exchange rate.
Since then, I believe that those mistakes have been recognised, not least on the Conservative Benches; if not in words, at least in actions. But they have been remedied by an agonisingly slow process. True, we have begun to climb up from the bottom of the precipice over which we were thrown, but we have yet to reach the point at which we would have been if the trend had been maintained. The consequence is that when we look at our economy we see that manufacturing output, manufacturing investment, employment, inflation and competitiveness are all comparatively worse than in 1979 and worse than the records established by other comparable countries.
The real question is not the attribution of blame but where we go from here. Do we take advantage of the opportunities that Conservative Members consistently told us during the election campaign are now opening before us? Are there grounds for confidence that the Government have at last learned their lesson and that they will now, if not actually admit their mistakes, at least remedy them in full?
At first sight, let me be quite frank about this, the prospect is not entirely unpromisng. Let us concede immediately that output is rising relatively fast. Unemployment does appear to be falling, although the trend is very much exaggerated by the statistical devices that are being used. The balance of payments is weakening, but a balance of payments deficit of the size that is likely over the next year or two is likely to be manageable in view of the recent surpluses, largely attributable to North sea oil. Inflation, although comparatively worse than in 1979 by comparison with other major competitor countries, is certainly under control. Therefore, we are entitled to ask, "Is everything set fair?" Are Ministers entitled to argue, as they did during the election, that we are now on the threshold of a new economic era?
I would like to test that proposition by making an assumption which I believe is not entirely fanciful. Let us assume that Britain is about to be privatised and that what is now in prospect is that we are to be turned into Great Britain Limited, a flotation is to be organised and investors are to be invited to subscribe. Should we, as potential investors in that hypothetical situation, think that it is a worthwhile and safe investment?
The first thing that any prudent investor would do would be to notice that much of the current improvement is recent and rests on factors that look likely to be temporary.

Mr. Dennis Skinner: Election boom.

Mr. Gould: The improvements, as my hon. Friend the Member for Bolsover (Mr. Skinner) says, owe a great deal to policy measures that reflect pre-electoral considerations rather than any long-term shift in strategy.
I see the Chancellor smiling. He is entitled to congratulations. He turned back the mileage figures with a skill worthy of any second-hand car salesman. As happened before the 1983 general election the monetary policy was relaxed, public spending limits were raised and the exchange rate was allowed to weaken all in order to produce that pre-election boom. Unfortunately, all the evidence, evidence that ought to be noticed by the prudent investor, is that some of those policies have already been reversed. The exchange rate has appreciated, the competitive advantage, about which so much was made by the Confederation of British Industry and others, has already been wiped out. The Chief Secretary, within a couple of weeks of his appointment, has made it clear that we are facing a new round of spending cuts.
There are further questions that should be asked. The next question is whether this is an enterprise in which the resources are being used properly. A would-be investor would direct his attention particularly to that unused resource of well over 3 million unemployed. He would say, "This is not only a tragedy and an immense social burden to be borne by those who face the dole, but it is the most conclusive argument demonstrating mismanagement in our economy." Any prudent and efficient management would not defy common sense in the way in which the Government have done by deliberately pursuing policies that keep out of use the valuable resources that could be making us all better off. In other words, unemployment, while a cruel burden for the unemployed, affects us all. It makes us a poorer country than we need to be.
The next question is, what has been done with the assets entrusted to the management? What happened to the £65 billion-worth of North sea oil revenue? Where did it go? What now represents that wealth? The truth is that that money was spent largely on sustaining unemployment. There is nothing of it in the infrastructure, in research and development, in the training of our work force or in investment in our industry. There are no assets that represent that enormous bonus. Similar questions can be asked about the assets that were sold off, those public assets so painfully built up over so many years. What has happened to the proceeds of those assets? Let us forget the wisdom or otherwise of selling them off or transferring ownership and just ask what happened to the proceeds. Where are the assets in the balance sheet? The truth is that there are no assets because they were translated into current expenditure. That would be marked down by the hypothetical investor when he looked at the record of the board of management.
The next question would be about the prospects for the trading performance of the enterprise. A great deal has been made of the improved trading prospects. The CBI was brought into action to say how rosy the prospects were. However, our competitiveness has again begun the steady decline in the wake of a 10 per cent. rise in the real


exchange rate since October and the attractive prospects that we saw a few months ago have already been eliminated. It is hard to see on what any optimism could now be based. Our competitive position has now resumed that steady decline that has caused us so much damage over so many years in the past.

Mr. Higgins: The hon. Gentleman says that the assets have been transferred into current expenditure. Is he not confusing financial flows with what has happened in real assets? Can he explain how real assets would be transferred in the way in which he suggests?

Mr. Gould: If the right hon. Gentleman were to reflect for a moment he would understand that I am talking about the proceeds of the transfer of the assets. It is the proceeds that have now disappeared and have been spent.
Another important question that any prudent investor would ask would be whether adequate provision had been made by the current management for future investment and future growth. The picture is extremely bleak. Not only, as we all know, is investment in manufacturing industry much lower than it was even in 1979; it is much lower than in other competitive countries. More than that, we are actually disinvesting. There is no prospect, given the current gloomy trading outlook, of that investment picture transforming itself.
We are the first de-developing country. We are failing to replace our capital assets. In each of the past six years, British industry has invested less in fixed assets than the amount set aside for depreciation. That has never happened before in peace time. That means that not only are we failing to keep up with our competitors in terms of investment in manufacturing capacity, research and development, training and infrastructure, but we are failing to maintain what we have. To any potential investor that would be a very real red warning light. The failure to make that investment means that our prospects, however much they may be dressed up for political reasons, must be extremely gloomy and problematic.

Mr. Tim Smith: When I listen to the hon. Gentleman I sometimes wonder whether he reads any of the official statistics. The June investment intentions survey of the Department of Trade and Industry shows that in 1987, an 8 per cent. rise in real industrial investment is expected.

Mr. Gould: As is unfortunately so typical of spokespeople for boards of directors that are under pressure, they decline to refer to the record and always talk about intentions and prospects for the future. What any prudent investor in Great Britain Limited would be bound to say is that there is nothing on the record or in the official statistics that would support the hon. Gentleman's optimism. Indeed, there is much in the statistics, along the lines that I have already mentioned, which suggests that our investment pattern is deficient and that that spells real trouble for the economy in the future.

Mr. John Butterfill: Will the hon. Gentleman give way?

Mr. Gould: I have given way quite enough for the moment.
The next important questions that a hypothetical investor would ask is, "According to what principles is this enterprise to be managed? What is the trading policy and investment policy? How is the enterprise to be run?" The

investor would remember that for years we were told that the enterprise was to be run according to something called monetarism and that that was the one lodestar or guiding star of policy—that all we had to do was to fix the targets for sterling M3, make sure that we reached them and that everything else would be fine.
It does not get much publicity these days, but sterling M3 is now running at an annual rate of over 30 per cent. In the three months to April, it ran at an annualised rate of 33·6 per cent. In the three months to May it ran at an annualised rate of 32·7 per cent. It is probably an even worse situation now because it takes no account of the Bank of England's purchase of commercial bills, which depresses those figures somewhat. It is no wonder that those figures have been quietly and decently buried. I do not mourn their passing.
I think that we are entitled to ask now what is the basic policy—how is this enterprise to be run'? Is it to be run according, for example, to the exchange rate? If that is the case, what does that mean? Will we join the exchange rate mechanism of the European monetary system? I believe the Chancellor wishes that. It is a peculiar situation if the Chancellor cannot get his way on such an issue. Is it the case, therefore, that the Prime Minister's objections remain? If we are not to join the EMS, are we shadowing the EMS? We ought to hear the answer to that.
Is that the Chancellor's exchange rate policy? What do the most recent reserve figures show in respect of Bank of England policy? Is the Bank of England now intervening in the markets to put a floor under the pound? What does that signify for competitiveness? Does that mean that the Chancellor is now happy with the loss of competitiveness of 10 per cent. since October? Is that the exchange rate policy, in the light of so much damage done by an overvalued exchange rate? Is that now the exchange rate policy that he is prepared to impose on British industry? I do not suppose for a moment that we will get answers to those questions, although we are entitled to them. The Chancellor proposes to close his eyes and drift off into some imaginary dream world.
If it is not to be the exchange rate, is it perhaps our old friends, public spending targets? In the period leading up to the general election they were the subject of hymns of praise. Those increased spending plans were signs of virtue, signs that the Government had not changed their spots, heaven forbid, but were intent on raising the level of public services and providing more resources. We now know that within weeks of winning the election the Government are back with a new Chief Secretary proclaiming that he is now intent on once again wielding the axe on public spending programmes. We are again no doubt to go through a long charade whereby the Chancellor and his Ministers announce public spending targets which they then try to reach, but fail in the outcome.
Another question that a hypothetical investor would ask is whether the present economic situation is inherently stable or whether there are nasty matters in the woodwork that will come out shortly and will require attention. Are there important capacity constraints that will inhibit any expansion that may be planned? The answer, according to Phillips and Drew—not particularly in the confidence of the Labour party, I might say, but as reported in the Financial Times—is yes. Of course, that is in accordance with common sense. That would be the price we would pay for the long years of neglect and decay in manufacturing


industry where the economy was depressed to a low level of output and where we failed to make the investment that would secure that new productive capacity. We must not be surprised if the capacity lost as a consequence of economic mismanagement takes some little time to be restored.

Mr. Nigel Forman: What about the Finance Bill?

Mr. Gould: I am coming to that. That is my next point. Can we look with equanimity at the explosion of private credit, with all that that means for interest rates and monetary policy? Surely we should recognise that the explosion of bank-created credit for consumption and for asset inflation rather than industrial development is a dangerous development and simply cannot be sustained. When the Chancellor tries to excuse it, as he did in his speech to the Finance Houses Association on 17 June, by saying that it has largely gone in mortgages rather than in credit cards and so on, he entirely misses the point, as I am sure he recognises. Mortgages are the means by which asset inflation is stoked up and a great deal of the money paid out in mortgage advances is, as he well knows, slushing over into private consumption.
I am not alone in saying that. I am glad to see the hon. Member for Lewisham, West (Mr. Maples) in his place. He wrote an article in the publication of the Economic Research Council recently in which he agreed that it could not be sustained. He said in that article:
The banks have lifted their lending substantially from industrial customers to the man in the street. Manufacturing industries are seriously constrained by high interest rates which the personal and property sectors are willing to pay.
I agree with him that that is right. That is the danger and damage inflicted by the explosion of private credit and that is why the Government's ideological concern with public credit is so misplaced. Given this series of worrying questions, would not the prudent investor ask, "What does the board of directors have to say and what does it propose?"

Mr. Skinner: What about the reserves?

Mr. Gould: Indeed, what about the reserves, now being spent in a vain attempt to prop up the pound?
The prudent investor would ask, "What is it that the board of directors proposes?" The answer would be, no doubt, the Finance Bill. That is what the Government have to offer to meet the considerable concerns of reasonable investors. I concede immediately, as the Chief Secretary made clear, that the Finance Bill is just a rump measure—it is just what remains from the earlier Finance Bill that could not be got through before the general election. I also concede that there are many matters that would not be appropriate to a Finance Bill—matters of concern to the future of the economy. Nevertheless, it is important to note that, so far as the Finance Bill is a measure concerned with taxation, it is largely irrelevant to the major changes in taxation that we know are in prospect—changes in VAT and poll tax. That is where the major change in the taxation burden will come, but the Finance Bill is largely irrelevant to that prospect.
We must then ask what the Finance Bill proposes as measures of substance to deal with our future prospects. The answer is, as the Chief Secretary conceded, that there

are two measures of substance, one to do with personal pensions and one to do with profit-related pay. In terms of personal pensions, are the tax changes needed to give effect to the principles first established in the Social Security Act? To the limited extent that those principles increase the transferability of pensions — we do not necessarily endorse the portability of pensions—they are welcome.
There are many things that could have been done to improve the operation of pension funds and pension schemes to make them more accountable to their members and to integrate the immense financial and investment power of pension funds into the economic needs of the country. However, the Bill institutes changes that threaten the viability of so many occupational pension schemes by offering attractive prospects to the most attractive insurance prospects for pension purposes. It is almost certain that many young and fit people with long employment and contribution prospects ahead of them will opt out of the occupational schemes. The consequence will be that those left in those occupational pension schemes will be those who cannot easily obtain at a reasonable price personal pension cover in the outside market.
That will have major implications both for the obligations of the pension schemes and for their future incomes. Ministers may shake their heads, but trustees of pension funds are already seeing the signs and are extremely worried about what the Bill means for the future viability of those schemes. The danger is that, as soon as the viability becomes threatened and increased contributions are demanded from employers to keep them afloat, at that point employers, who are already engaged in a direct competitive struggle on costs with their other competitors in the market, will have an incentive to wind down those schemes.
The second proposal is profit-related pay. At the time when this idea was first floated and the Green Paper was produced, the Chancellor appeared to pin considerable hopes on the measure because that was at a time when he professed to believe that our economic problems could be resolved by forcing down the level of real wages. I would understand it if he found it slightly embarrassing to try to adhere to that doctrine now when, throughout the general election campaign and the period preceding it, he made such good use of the fact that wages had risen extremely quickly under his jurisdiction.
We have a profit-related pay scheme with tax incentives that are designed to get it off the ground, but it is based on the economic fallacy that our economic problems stem from wages that are too high. It is the Government's belief that workers should be prepared to price themselves into jobs, but that is economic illiteracy and a proposition that cannot stand examination. Even if the profit-related pay scheme could produce lower wages at the margins, it is doubtful whether that would make any difference, except an adverse one, to our economic prospects. There are many other objections of mine and of the Institute of Personnel Managers, for example, which says that it would be difficult to protect the taxpayer against cosmetic deals that are designed to take advantage of the tax benefits that are on offer.
If we are really concerned about improving worker motivation, why not consider other and better means of doing so that could attract tax benefits if necessary? If the proposed measure is to be of such benefit to companies,


workers and the economy generally, why are we using taxpayers' money to provide an extra benefit? If the proposal does not work, why are we wasting taxpayers' money for such a frustrating purpose?
It seems that the two major measures in the Bill and the Government's response when they are asked how the economy is shaping up are at best irrelevant and at worse likely to he damaging. The conclusion must be that there is nothing in the Bill that aids the potential investor. He will remain concerned that resources have been mismanaged and under-utilised. He will find that the trading outlook is poor, that inadequate provision has been made for the future, that revenue-earning assets have been sold off, that it is not clear on what basis the enterprise will be managed, and that the current policy stance is confused and untenable.

Mr. Tim Smith: I wonder whether the hon. Gentleman noticed that when the annual general meeting of United Kingdom Limited took place recently an alternative board of directors put itself up for election, only to be rejected by the shareholders? Has the hon. Gentleman and the Labour party learned any economic lessons as a result of the outcome of the general election?

Mr. Gould: I am glad that the hon. Gentleman is following me in the analogy that I have laboured so hard to establish. There will be investors—often directors, their friends and members of the family — who will expect preferential treatment. There will be others who, conditioned by long, sad experience and low expectations, will be prepared to go along with under-performance. It is rather like the old family business with which we are all familiar. There was an old foundry in my constituency which had been in private ownership for many years. It was allowed to run down because the necessary investment was not made and because the work force was allowed to run down too. However, the business survived long enough to provide a good living for the owning family for as long as it wished to draw an income from it. In the end, the business closed, and that is the propect that we face. There will be shareholders who will take that view and say, "That is good enough," but I believe that it is not.

Mr. Michael Colvin: Will the hon. Gentleman give way?

Mr. Gould: No, I shall not give way. I am about to bring my remarks to a conclusion.
The Opposition conclude, as I believe the prudent investor will, that we have a basically strong economy with many advantages, resources and assets. It takes time for mismanagement to destroy an economy, but there has been mismanagement of ours and there is little prospect of improvement. The question that we shall pose over the next four years is whether we can make better use of Britain's assets, resources and opportunities. Are we likely to produce the best return from the nation's assets and the best outlook? Can we ensure that there is an increased level of prosperity for everyone within the economy and not merely for a few?

Mr. Colvin: rose——

Mr. Gould: No. I have already said that I shall not give way.
Given the Government's record and our prospects while they remain in office, it seems that they will not be able to produce the necessary improvements. Any investor

would be bound to conclude that what is required at the next available opportunity is better, more caring and more competent management. In other words, we are talking about an enterprise that is ripe for a takeover bid, and that bid is in preparation now by the Opposition.

Mr. Leon Brittan: I begin by giving my right hon. Friend the Chief Secretary to the Treasury a warm welcome from the Government Benches on the occasion of his first introduction of a Finance Bill. I can assure him from personal experience that, even if his position is not exactly a recipe for instant personal popularity with ministerial colleagues in the spending Departments, at least he will have the sustained interest of having every finger in virtually every governmental pie. There is hardly anything that a Government can do that does not involve the spending of money. I am sure that we all wish him well in his new task.
I congratulate, too, the hon. Member for Dagenham (Mr. Gould) on his splendid success in topping the ballot for election to the shadow Cabinet. I have always wondered what the qualifications are for achieving such a success, and I know now that it is the ability to produce attractive but brittle bricks with insubstantial straw. When the hon. Gentleman moves to the post to which he is obviously well suited, that of shadow Foreign Secretary, I am sure that he will be a great success.
The Budget judgment that is reflected in the Bill has been triumphantly vindicated. It was well received by the markets and it has been endorsed by the electorate. Its soundness is reflected in the economy. The economy is in better shape now that it was at the time of the Budget statement or during the general election. The prospects for the balance of payments appear to be better than the £2·5 billion deficit that was predicted by my right hon. Friend the Chancellor of the Exchequer at the time of the Budget. Unemployment has fallen more sharply than expected since the Budget and it is an amazing reflection of political virtue that the fall happened shortly after the election rather than before it. My right hon. Friend the Chancellor of the Exchequer is right to say that the major uncertainties affecting the economy relate to the world scene rather than the domestic one.
I find it difficult to see that any significant change in the United States budget deficit is likely to assist us. Some of us have been trying to explain for years the difference between Thatcherism and Reaganomics. However much we may want to cut taxes, it is foolish to do so unless the deficit is under control. If we cannot curb spending, we must increase taxes to deal with the deficit. That is exactly what the Government did in 1981, and, in spite of all the cursing and reviling at the time, it was the beginning of the process of recovery. If the United States has not accepted that advice over the years, it is hardly likely that it will be accepted now during this phase of the United States political cycle.
The other problem facing the world economy is that of Japan. On the face of it, the prospects appear to be better. The Japanese Government have produced an expansion plan which is both substantial and credible. In the past such plans have usually run into the sands of bureaucracy and the obscurantism of the Japanese industrial establishment. As one who has resisted the shrill voices that call for protectionist measures against Japan, I hope that the Japanese Government will realise now that it is


imperative that they make their current plans stick. With international caveats to be made, the domestic scene looks set fair.
The conclusion that I draw is that the central thrust of the Government's economic strategy should continue to be supported. Within that strategic framework, however, all our attention should be devoted to the remaining problem areas—the black spots of the economy. Those problems are the continuing high and unacceptable levels of unemployment and the imbalance between different parts of the country. The problems cannot be tackled by fiscal measures alone, but fiscal measures have a vital part to play in dealing with priorities.
That is why I warmly welcome the Bill's major stimulus to profit-related pay. I am glad that the Chancellor has persisted with his proposals, in spite of the combination of inertia, reluctance and hesitation with which they were originally met. The proposals are important because of their effect in motivating people in industry into giving employees an interest in success, but they are far more important than that. The hon. Member for Dagenham is correct in saying that there are other ways of achieving that. Far more important is the fact that the measure will increase employment and decrease redundancies. Therefore, it has a crucial part to play in the achievement of the first of the twin objectives that I have identified.
In times of recession, employers applying the scheme will automatically find their pay bills falling and will not find it necessary to lay off people to the same extent as would otherwise have been necessary. A much-needed increased flexibility in the labour market is thereby introduced. In times of an expanding economy, employers' reluctance to take people on for fear of what may happen at some time in the future should be significantly reduced. I am glad, therefore, that the Government have found a way of dealing with the problems that were identified when the proposal was originally introduced—problems such as avoiding any exacerbation of the so-called insider-outsider difficulty. Above all, I am glad that the proportion of profit-related pay exempt from income tax has been doubled to half.
The Government are now providing a real stimulus to employment, but it is up to employers and employees alike to respond. Nobody can doubt the genuine feeling of responsibility to the unemployed that exists among those who are in employment today, nor their real concern about doing anything possible to prevent further redundancies. They now have the chance to convert their general and sincere feeling of concern into action that will improve employment. They have a real opportunity to do something about it by agreeing to participate in schemes of this kind.
I hope that employers will not be timid and go only for schemes whereby only 5 per cent. of total pay is in the profit-related element. If the Bill is to have a significant effect in improving employment, it is intensely desirable not only that many employers and employees agree to participate in the scheme but that they go for the full 20 per cent. permitted by the scheme.
If profit-related pay helps with unemployment, it presents some philosophical problems for my right hon. Friend the Chancellor if he still has aspirations to introduce substantial tax reform later in the Parliament, as I hope he does. Most of the ideas for tax reform that

have been floated are on the basis of the concept of fiscal neutrality. Let us remove the plethora of allowances, it is said, and reduce the rate of tax. That statement derives from the combination of a belief in the positive benefit of low tax rates and a feeling that Government should be extremely reluctant to engage in social or economic engineering by manipulating the tax system. The profit-related pay scheme is a major move in the opposite direction. It cannot conceivably be called fiscally neutral because its purpose is to achieve certain objectives by fiscal inducements. I unhesitatingly say that, although I generally support the moves toward fiscal neutrality, that objective must not be allowed to override other considerations.
The imperative need to which I referred to reduce unemployment and to improve the imbalance between regions is of greater importance than strict adherence to fiscal neutrality. I believe that so strongly that I shall urge another breach in the doctrine. The breach in the Bill at the moment does not do anything to deal with the problem of regional imbalances, which is the second problem to which I referred. Of course, if the breach that I shall invite my right hon. Friend to embark on cannot be introduced this year, I hope that it will be the first charge on the increased fiscal adjustment which our expanding economy will probably make available in the coming year. I regard its implementation as more important than either further reducing the public sector borrowing requirement or even reducing income tax.
I said that regional imbalances cannot be reduced solely by fiscal means, but fiscal means have a part to play. The Government are now looking more broadly at regional policy, and it is right that they should do so. We have a plethora of Government Departments in on the act—the Department of Education and Science, the Department of Employment, the Department of the Environment, as well as the Department of Trade and Industry, which traditionally had responsibility for such matters. Not only are more Departments involved, but there are new concepts involved, such as more urban development corporations and mini-urban development corporations.
It is quite right and natural to look at the situation, but if the conclusion that emerges from such a review is to abolish regional development grants in assisted areas, it will be deeply resented and fiercely resisted. The 1984 review was entirely right because it focused on wasteful expenditure that did not improve job prospects but merely assisted the capital investment that would take place in any event. In their amended form, the grants are not wasteful. They have an important part in regional policy. If the Chancellor is worried about regional development grants because they have led to greater expenditure than was anticipated, I shall give him one of the reasons why that is so. When I was Secretary of State for Trade and Industry, I called in the regional directors of the Department and said to them that they should not just sit in their offices waiting for applications for grants but should go out, drum up business and try to get activity in the regions. If that attitude led to more grants being applied for and more money being spent, it seemed to me to be a good thing rather than a bad thing.
One of the reasons it is important to deal with the problem of regional imbalances by continuing to have regional development grants is that the problem of regional imbalances does not apply only to inner cities. At the moment, we are in danger of focusing excessively on


inner-city problems. As many right hon. and hon. Members know very well, much of the problem in areas that are not doing as well as the south-east of England rests in declining smaller towns and industrial villages. Nowhere is that claim more true than in the north-east of England, but it is also true in Lancashire and in west Yorkshire. There are parts which could not conceivably be described as inner cities which are suffering just as great environmental and employment blights. It would be a great mistake to focus exclusively on the buzz words "inner cities" as the be-all and end-all of our problems.
If that is so, it is right to focus on regional policy in a fiscal way as well. The Government realise that in some of the other measures that they are putting forward—this is expressed through my right hon. Friend the Chancellor of the Exchequer and the Chancellor of the Duchy of Lancaster — there is pressure in favour of regionally related pay. They have made painfully slow progress in achieving that. However, in spite of what the hon. Member for Dagenham said, I believe that it is possible to price oneself into work as well as out of it.
I accept that for some the very concept of a labour market is undignified and unattractive, but that does not mean that one can ignore it or that it is unreal. There can be no doubt that if one goes to one of the regions where things are not quite as rosy as they are in the south-east of England and says to the people there, "In addition to all the problems from which you are suffering at the moment we are now going to ask you to take less pay," one would be bound to appear at first sight to be adding insult to injury. In spite of that, we need to reduce labour costs in the regions if we are to make progress in dealing with the problem of regional imbalances.
There is a way in which to square that circle. We should make regional differentiation in pay rates acceptable by combining it with reduced rates of taxation in assisted areas. The effect of doing that would indeed be lower pay—and employment would therefore be assisted—but tax would also be lower. Employers could afford to employ more people in those areas, while take-home pay and purchasing power in the regions would not be reduced. Of course, there are problems in introducing such a scheme and in defining the areas to which it would apply. But that is already done in other cases; it is as difficult a task to draw up a map of the areas that should receive regional development grants.
There are problems of another kind involving the complexities of the PAYE system and business locations. Because of those complexities, probably the best solution would be regionally differentiated national insurance contributions. We would reduce national insurance contributions in the regions to which we were trying to to attract employment. That would make regionally related pay infinitely more acceptable. The Government would then be giving help in a way that would reflect the reality of regional economies that are operating at a slower pace than rapidly advancing economies in other parts of the country. If they did that, the Government would be working with the grain of economic forces by using their fiscal power to attract employment while at the same time operating the labour market to reduce the costs of labour in areas where employment is most needed.
If not in this Finance Bill, then in the future, I hope that my right hon. Friends will seriously and sympathetically consider the possibility of combining their advocacy of

regionally differentiated pay with a regionally differentiated tax in the form of national insurance contributions. If there was fiscal support for flexibility in the labour market, regionally as well as nationally, in addition to profit-related pay and regionally differentiated pay rates, fiscal policy would be playing its limited but vital part in dealing with the major outstanding problems that must be our topmost priorities — reducing unemployment and regional imbalances.

Mr. Robert Sheldon: I agree with the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) about the major problem of reducing regional differences. As the right hon. and learned Gentleman accepts, implicitly, there is a great divide between north and south and between developed and underdeveloped parts of the country. It must be our major task to heal that divide and the right hon. and learned Gentleman is right to assert that we need to look at the problem anew. The right hon. and learned Gentleman seemed to suggest something similar to the old regional employment premium, which was valuable. There were enormous problems of differentiation, discrimination and so on, but the scale of the problem is now so great that we must consider methods of dealing with it that we may well have rejected in the past. The divide between north and south is a fact, and we must eliminate some of its consequences.
I, too, offer my good wishes to the new Chief Secretary to the Treasury. He knows, as does the whole House, the burden of work that he has undertaken. There will he few aspects of Government policy that will not come before him as the subject of agonising decisions, frequently in the early hours of the morning. That is the penalty that he must pay for taking on this arduous task, and we offer hint our good wishes in it. I also offer my good wishes to my hon. Friend the Member for Dagenham (Mr. Gould) and look forward to hearing him on important matters.
The Chancellor of the Exchequer used to be in favour of fiscal neutrality, but he seems to be moving away from it rapidly. We are considering proposals on pensions and profit-related pay. With those, and some of the nonsense about mortgage interest relief and pensions for the self-employed, we have moved so far away from fiscal neutrality that we shall need a fresh definition from the Chancellor, which may be forthcoming in due course.
Usually Finance Bills deal with a number of matters that do not appear in this Bill because it is a truncated Bill. One matter that is not included in this Bill but will certainly be included in the next is VAT. I was intrigued by the Prime Minister's reply to a question tabled by my hon. Friend the Member for Don Valley (Mr. Redmond). He asked the Prime Minister about her proposals to place VAT on children's clothing and shoes. After hesitating a little, she said:
We shall continue to have a zero rating on food and that is crucial. The question then arises about electricity, gas and fuel. It is not our intention to put VAT on those. If anyone tried to put VAT on children's clothes and shoes, they would never, never get it through the House. I repeat that."—[Official Report, 7 July 1987; Vol. 119,c. 192.]
It would appear, therefore, that there are three categories. Food is crucial, and we understand that. The Prime Minister said that the Government would never be able to get the introduction of VAT on children's clothes and shoes through the House. It has to be said that the


Government have got a number of measures through the House which one might put in the same category so that is rather an unusual assurance, which I do not take as a certain expression of the Government's attitude. On electricity, gas and fuel, we hear only that it is "not our intention" to introduce VAT. Those are the new categories and we must examine them in the light of Lord Cockfield's proposals.
We must also examine excise duties. Although much has been said about the harmonisation of VAT, less has been said about the possible harmonisation of excise duties. The previous Finance Bill failed to revalorise excise duties, with a gain to the Government of 0·3 per cent. in the retail price index: the RPI was 0·3 per cent. lower than it otherwise would have been. That is fraudulent. The normal annual uprating of excise duties is purely in line with inflation. By failing to make that uprating, the Government kept the RPI rather lower. The consequence of excise duties being harmonised is that petrol, oil, tobacco, spirits and other alcohol will be lower in price and will yield very much less revenue.
There are social as well as fiscal considerations. The problems of harmonisation are great because there are more than 33 VAT rates in the Community. I had the privilege of being Financial Secretary while Britain held the presidency of the Community. I took the chair in discussions on the sixth VAT directive, so I know the problems involved in achieving satisfactory harmonisation. Britain did extraordinarily well in the discussions, insofar as we gave nothing away but many other countries did.
We are talking about giving substantial powers away. I should like to mention some that we could give away. It is not merely a matter of the harmonisation of excise duties. There would be profound social changes in Britain if the duty on alcohol were the same as on the continent. There would be greater dependency on alcohol and greater use of tobacco, which would hardly fit in with modern accepted theories on the effects of those types of so-called drugs.
If the Prime Minister is determined to oppose these VAT and excise duty changes, she can readily oppose them. She has an enormous advantage in terms of the 33 different rates of VAT and the proposal, which is an essential part of that, to accept the VAT returns of other countries. It would mean that, if there were a VAT repayment, we would be paying money to Germany, France or, God forbid, Italy on the basis of their documentation because of the VAT that they have notionally paid. Bearing in mind the problems that we have with wine, and so on, paying out money on the basis of VAT statements made by another country would be a problematic and uncertain way to proceed. The Prime Minister has an enormous advantage in that she can halt that proposal or at least delay and delay until she finds herself in a position where little needs to be done to prevent any further action.
We are in an unusual position with the poll tax. Most countries impose a property tax — it is a standard measure. Property is eminently taxable. To tax various items and not to tax one's home, the mortar, cement and bricks that form part of it, is astonishing. Those items are so clearly visible that property becomes eminently taxable. There is some advantage in having a certain correlation

—not a complete one—between personal wealth and the value of the dwelling in which one lives. I expect that, if the Government ever produce a poll tax, not too far hence the Treasury will produce some variation on a property tax. It would not surprise me if, at this very moment, someone in the Treasury were devising some sort of contingency property tax. Even crudely introduced at a rate of £50 or £100 a dwelling, it is enlightened taxation compared with the poll tax. It would produce £1 billion or £2 billion of revenue for the taking. Chancellors of the Exchequer whom I have known have not dismissed such revenues out of hand, so I expect that there will be some examination of this idea. The Treasury would not be the Treasury that I know if it were prepared to forgo so lightly the possibility of such a tax.
This afternoon, on my way to the House, I happened to pass the Treasury. Some state visit appears to be taking place and many flags are going up. Normally, the Treasury trots out its three national flags, its three service flags. They are put out and carefully rolled up and packed away after each visit, and they last for years. These tired old flags come out on each occasion. That is the Treasury which we know and to which we have become accustomed. But, surprise, surprise, there were brand new flags out today. Perhaps the Financial Secretary should look into that. There is something happening in the Treasury; it is spending money on new flags. Attractive though they are, that is not the normal expenditure by the Treasury as I know it. Perhaps the Treasury is changing, after all.
The Chancellor's major responsibility—one echoed in some way by the right hon. and learned Member for Richmond, Yorks — is over the conditions and prosperity of all the people. That is an awesome responsibility. In looking at the measures implemented, we must consider not just the figures but the facts as we see them—the facts as the right hon. and learned Member for Richmond, Yorks sees them in parts of his constituency more favoured than mine and as I see them every weekend as I return to my home and constituency. I see the houses decaying, the roads with potholes, the unemployment and the reasons for them. The rate support grant has been cut and the towns are in poor condition, councils are blamed for the enormous extraction of money.
There is even talk of loony councils. During the election campaign, I had to point out that the council in my constituency created a war museum to honour the Manchester regiment. The museum was opened by the Queen Mother. It would be difficult to produce a better response to any accusation that the council was loony. That responsible council has been forced to cut expenditure on essential aspects of its work. It is very largely such councils that have been blamed while the Government have been able to avoid blame.
The right hon. and learned Member for Richmond, Yorks talked about black spots. We need to look not only at fresh ways of bringing money to those areas that will produce work but at what has happened. My constituency has a large number of businesses that produce modest wealth. There are no large firms. A typical firm employs between 20 and 100 people. As the House knows, because I have said it again and again, between 35 and 40 per cent. of those firms have closed, and they will never open again. More money must be made available than would have been necessary as few as six or seven years ago. It is much easier to enlarge a firm's prospects than to create


something where there is nothing. We are starting from a much smaller base. There was 4 per cent. unemployment nine years ago; today in real terms it is 15 per cent; next year 18 per cent. — who knows? The right hon. and learned Member for Richmond, Yorks correctly drew attention to this fundamental aspect, which must be considered afresh. However much the Government dislike having to spend money in these ways, they must do so if they are to maintain the unity of this country as the important condition I believe it to be.

Mr. Tim Boswell: I am grateful to you, Mr. Deputy Speaker, for calling me to make my maiden speech in this debate, because finance, taxation and economics are still at the centre of our national affairs. The fact that we are no longer quite so obsessed with the subject as we might have been 10 or 20 years ago seems to be some index of our growing strength in those respects. Nevertheless, I rise with some diffidence in place of my predecessor, Reg Prentice, who served the House for exactly 30 years. Of course, not all that time was spent representing my constituency of Daventry and, indeed, only the last 10 years were spent in the interests of my party. He was therefore bound to be something of a controversial figure in the House.
I can speak as one of Reg Prentice's former constituents. Indeed, I was proud to be his constituency chairman for the first four years of his time at Daventry. I greatly appreciated his qualities of courage and forthrightness, his personal kindness to all he met and his wise advice to me. He made a considerable contribution to our affairs. As time and the generous traditions of the House soften any asperity, I hope that all hon. Members will join in wishing Reg Prentice a long and happy retirement. I am quite sure that it will be a lively one.
The parliamentary history of my constituency is one of personalities. I noted with some surprise during the campaign that Mr. Speaker Fitzroy, who died within a few months of my birth, is still well remembered. Remarkably, looking further back, the Cartwright family, from my home village of Aynho, held the seat continuously for almost a century from 1797 to 1881. Our lovely village of Aynho, with its unique and distinctive apricot trees, lies at the southern tip of my constituency. I can set course north from there and travel more than 40 miles in a straight line, although there is hardly a straight road on which to do so.
Many hon. Members may be familiar with the other axis, that from south-east to north-west, because as they return to their constituencies they will use either the M1 or the Roman-built alternative, the A5, Watling street. If they are lucky enough to avoid one of our too-frequent traffic jams, they may pass quickly across us from the edge of south-east England, at Milton Keynes to the gates of the west midlands, at Rugby. However, they might do a great deal better to linger in one of our three attractive and flourishing towns, Daventry, Brackley and Towcester, or in our large and small villages, or in our historic, unspoilt and rather under-visited countryside.
We can boast the national waterways museum at Stoke Bruerne and the battlefield of the decisive parliamentary victory at Naseby. Our strategic position at the crossroads of England was recognised by the establishment of the national cavalry barracks at Weedon two centuries ago.

Today that means that half the nation wants to come and live among us, and the other half wants to drive through us.
While I share with other hon. Members the concerns expressed during the campaign nationally, for example about education and pensions, I shall in future want to lay special emphasis on the issues of planning, traffic and bypasses. I am indeed fortunate to represent such a beautiful and flourishing constituency and, in no selfish sense, we wish to keep it that way.
I am pleased to be involved in today's debate on the Finance Bill, not least because my prior involvement in politics marked a degree of alternation between an interest in finance and taxation on the one hand, and in agriculture on the other. On the latter point, our present expenditure on the common agricultural policy constitutes a massive financial problem, without solving the equal and major problem of farm incomes. Fresh thinking has been needed and is now beginning to come forward.
I should like to pay special tribute to the work of my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling), whom I had the privilege of serving as his special adviser in Whitehall, for his dramatic initiatives in rural policy and his contribution to the new developments to encourage conservation, leisure and the rural economy. They will cost money, but will cost far less than unreformed surplus production.
Today's debate and this Finance Bill are a further stage in giving all our people, wherever they live, a stake in the nation's growing prosperity. I was lucky to play a small part in formulating the Conservative party's thinking on stimulating wider share ownership when we were in opposition during the 1970s. It is gratifying to see the next stage of that process developing.
I welcome the emphasis in the Bill on profit-linked pay, because only profits pay for pay. I welcome also the new flexibility in personal pension schemes. All these and the related measures that are already in place are directed towards giving ordinary people greater opportunity and choice and a sense of belonging, and are economically and socially beneficial.
Like many of my hon. Friends, I have heard in recent days some eloquent speeches from Opposition Members about the problems facing their constituents. I do not for a moment denigrate Labour Members. but I note that much of their debate is cast in terms of what is happening to those people. There are two false solutions that we should avoid. The first is the belief that massive infusions of public money will, on their own, solve the problem. The second is any recourse to the special and damaging type of private enterprise response, that of rioting on the streets. Neither of those solutions is acceptable. It is far better to do as I believe the Government will do and to blend the use of public money with the necessary contribution from the private sector, such as investment in better training and re-skilling, and a readiness to enlighten and stimulate enterprise and those who want to work to better themselves. I should like to hear rather less about what is happening to the inner cities and their inhabitants, and rather more about what is happening in them and coming from them, and the contribution that they can make.
My constituency of Daventry stands as a place of refreshment for the city dweller, as well as being a powerhouse of agricultural production and varied and lively economic activity. In today's world we face greater


integration, faster communication and a one-world economy. In today's economic and social conditions we can no longer say—if we ever could—that any man is an island. No constituency, even one as fortunate as mine, is an island. Indeed, no island state is an island. No community of nation states, however powerful, is an island. We sink or swim together and we all have a proper interest in one another.
In supporting the thinking behind the Bill, at the election and today, the constituency of Daventry and its Member stand ready to play their part and to make their contribution to building a united nation.

Mr. Rhodri Morgan: I should like first to congratulate the hon. Member for Daventry (Mr. Boswell) on having got through his maiden speech and on having got behind him what I have before me. He mentioned that he was rather diffident about rising to his feet because of the seat that he represents and its long history, including the fact that a Speaker of the House has represented it. That is also true of the constituency of Cardiff, West, that I represent.
Mr. Speaker's predecessor, now Lord Tonypandy, but then Mr. George Thomas, represented this constituency, give or take a ward or boundary change here or there, for 38 years, from 1945 to 1983. I am the present Mr. Speaker's predecessor's successor's successor and I suppose that in Wales that makes Mr. Speaker and myself virtually first cousins. At the same time in 1945 that Mr. Speaker Thomas started his parliamentary career, in the adjoining seat of Cardiff, South and Penarth, Mr. James Callaghan, now Sir James, started his parliamentary career. He went on to become Prime Minister. Therefore, between them, Sir James Callaghan and Lord Tonypandy performed 80 years of service to this House, although the service was concurrent and not consecutive, as it would be put in the Old Bailey.
The fact that there was 80 years of service from two hon. Members with adjoining seats in the same city—one going on to become Prime Minister and the other to become Speaker of the House of Commons—is, as it would be put in the Windmill theatre, an act that is difficult to follow. I am sure that that is something that my hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael), who made an excellent maiden speech about the Gracious Speech last Thursday, and I are very conscious of as we start our parliamentary careers.
I also wish to refer to my immediate predecessor, Mr. Stefan Terlezki, because in 1945. when Sir James Callaghan and Lord Tonypandy were starting their parliamentary careers, Stefan Terlezki and I were engaged in the one thing that we may have in common: at about that time, we were both learning to speak English. Although we may have been light years apart politically, one thing that we had in common was that neither of us spoke English as his first language. He was learning English in the maelstrom of war-shattered Europe in displaced persons' camps in Germany run by the British Army, and I was learning English in the slightly less hurly-burly atmosphere of the playground of Radyr junior mixed and infants' school in the heart of my constituency. When I made my maiden speech in the school playground, criticising an lbw decision or whatever it might have been,

Stefan Terlezki was probably learning English from Army sergeants. I am sure that while he was learning English he did not expect to end up in the Chamber of this House. Nor did I. But we both did, and he served his constituents diligently for four years. I am fortunate to be able to follow him.
When I attended that school it was not much like a normal school in a quiet village on the edge of Cardiff in the heart of the constituency, because it was swollen to twice its size by the number of evacuee children and the children of people who had arrived in Cardiff under the direction of labour, which was such a prominent feature of Britain during the war. We were never sure what almost incomprehensible English accent we would hear next. There were children from inner-city London, Maidstone, Birmingham and Motherwell. We heard so many variants on the English language, it was rather like a meeting of the parliamentary Labour party. The problem in the parliamentary Labour party is that we have considerable difficulty understanding one another—linguistically at least. Conservative Members have the opposite problem. With a few exceptions, they speak the same language, but they have extreme difficulty in communicating with the industrial heartlands of Great Britain.
The main subjects in this debate on the Finance Bill are the two interrelated problems which affect areas such as Wales, Scotland, the north of England and the inner cities of south and central England differently from the prosperous parts of Great Britain. There is an imbalance between the north and west and the south-east, and there is also an imbalance between services and manufacturing. We still have to solve that problem. During the eight years that they have been in power, the Government have conducted a shrinkage exercise on manufacturing. They proclaim proudly that we are now in the seventh year of economic growth, but that has not even brought manufacturing industry back to the level of output that it had achieved in 1979. We should not cross swords on such simple matters of fact.
It may be that, quite soon, we shall reach the level of manufacturing output that we had in 1979. I wonder what Conservative Members will do to celebrate the occasion when we regain that level of manufacturing output. Will they run up the flags and say, "What a great achievement. We have been on the Circle line for eight or nine years, and we have finally got back to where we started"? Some of us new Members from Wales do have similar experiences fathoming the complexities of the London transport system. Or will they try to ignore the fact? Recently, the Western Mail—the national newspaper of Wales—said that the Royal Mint, which is just outside my constituency, will soon be striking a new form of gold bullion coin which is Britain's answer to the kruggerrand and the Australian nugget. There are 2·5 million of them in store to launch on the investment market. It would he very suitable if that coin was launched on the day when manufacturing output again reached its 1979 level.
It will take even longer to reach the point that manufacturing output would have reached had it remained stable during those eight years; and if we want to wait until manufacturing investment regains its 1979 level, we shall have to wait another 10 to 15 years—probably into the 21st century. We must find a way of putting right that imbalance in our economy. If we try to live on services and continually squeeze manufacturing industry in a downward direction, we shall become very


dependent on the south-east and there will be a continuation of the rampant house price inflation which has made labour mobility between regions extremely difficult. Conservative Members believe that labour mobility is extremely desirable, but how can we have such labour mobility when the gap in house prices between the south-east of England and the north and west has yawned into a gaping chasm, making interregional movement impossible?
Similarly, if Conservative Members wish to encourage more owner-occupation, with which I entirely agree, they will be putting a further block on labour mobility between the regions. We shall have to go back to putting greater emphasis on work mobility. We can have labour mobility between the regions at different levels of prosperity only if we have approximately comparable house prices or not so much owner-occupation. Britain has gone in for large-scale owner-occupation, which is a bar to labour mobility. The Government must make the choice and solve the problem in their own way.
The country must know what the Government's attitude to manufacturing is. Is it the cold shower, of which they were so proud between 1979 and 1981? Even today, they refer to the great benefits and increased efficiency brought about by the notorious cold shower — the weakening of trade union power which came about as a result of the increase of unemployment, which was a result of the 20 per cent. drop in manufacturing output during those two devastating years.
Conservative Members should remember that those years were far more devastating in the outer regions of the United Kingdom. Those regions did not have the decision-making power, the big offices or the public sector employment. They did not have the service industries, or the employment in insurance, banking and finance. They were overwhelmingly dependent on industry, and especially on heavy industry. Therefore, with the increase in the currency rate to the wholly uncompetitive level of $2·40 to the pound, industry in Britain — especially internationally based industry and industry such as iron and steel which bought its raw materials from overseas—was crushed by the loss of competitiveness.
The currency changes, the use of energy pricing as a form of taxation and the high interest rates which monetarism introduced all bore down disproportionately. first, on heavy industry and, secondly, on manufacturing industry at large and, therefore, on the northern and western regions, which depended upon heavy industry and manufacturing generally and which did not have big investments in insurance, banking and finance. That is the problem. The decisions are made in the south-east of England, but those decisions bear especially heavily on the north and west. Until the position is reversed, the imbalance between services and manufacturing will not be corrected.
The Chancellor of the Exchequer has defended putting more of our eggs into the insurance, banking and finance markets as a form of wealth creation. Where will that get us? There are signs that the Japanese economic strength that we have already seen in manufacturing is coming through into insurance, banking and finance. Only two weeks ago, we heard that the Financial Times building in the City had been bought for £125 million by a Japanese property company. The Japanese are already coming into Britain in property, insurance, banking and finance.
Last year, the largest firm in the Eurobond market was not British or European, it was Nomura Securities of Japan. The Financial Times gave a list of the top 10 Eurobond issuing houses in terms of performance in 1985 — the last year for which there are full figures. It reported that Nomura had brought 11·1 per cent. of all Eurobonds to the market during that period. One of its senior British competitors was reported as saying:
They have simply gone out and bought market share, using their massive profits in the Tokyo market to subsidise loss-making Eurobond deals".
Where have we heard that before? We have heard it about motor cycles, motor cars, televisions, compact discs and all major manufactured goods. If anyone says that the Japanese will only try to out-compete this country and other European countries in manufacturing and that the Japanese will say, "Let the British have control of insurance, banking and finance," he is talking through his hat. That person is living in fairyland.
Japan, having achieved the dominant position within the manufacturing industries and having out-competed British manufacturing companies, will use the colossal savings ratio of Japanese manufacturing workers to build up a capital base for its bond dealing houses. Japan will dominate the City of London as well. There is no evidence to suggest that, because we have been unable to compete with Japan in manufacturing, we will, none the less, out-compete Japan on insurance, banking and finance. Japan has a much stronger capital base arising from its strength in the manufacturing industries. Therefore, we must pay much more attention to the underlying strength of our manufacturing exports if we want to retain our insurance, banking and finance industries.
Even though few Labour Members represent seats in the south of England, I appeal to Tory Members to have regard to the future. They should consider what happened to the steel, motor car and motor cycle industries. They should consider that that could also happen to the industries that are the staple industries of the south-east,. It all depends on the decade we are discussing. In the 1950s the shipbuilding industry in Japan rose to prominence. In the 1960s we witnessed the rise of the Japanese steel and car industries. In the 1970s it was the consumer electronics industry. In the 1980s we are witnessing the rise of the Japanese high technology office equipment industry. In the 1990s I have no doubt that the Japanese will dominate the insurance, banking, finance and other service industries. Such industries presently dominate the economy of the south-east. Those industries give a completely false air of confidence to the opinions of the Chancellor of the Exchequer, who believes that this country can live with a shrinking manufacturing sector and an expanding service sector. That is complete fairyland economics and, will be proved totally wrong unless Conservative opinions are changed over the next four years.
Unless such a change occurs we shall see what the Australians call "The last night of the Poms" come true. The Labour party does not believe in the cold shower philosophy that was applied to the outer regions of manufacturing in 1979–81. However, Conservative Members believe in that cold shower philosophy or, at least, defend what happened in 1979–81. They believe it was the greatest contributor to the expansion and improvement of efficiency in the economy of the country.
They claim that, for years, Britain was inefficient and overmanned. However, after the cold shower of 1979–81 they claim that we have had nearly seven years of economic growth. They claim that that is all based on the gains in efficiency that have arisen from management's right to manage.
The right to manage was established by creating a great pool of unemployment and by creating a new climate of realism forced by the decline in industry in 1979–81. However, if one considers the evidence it is difficult to ascertain whether there has been such an increase in efficiency. Indeed, last year's report of the British Institute of Management was headlined in the Financial Times:
Manufacturers 'have failed to improve efficiency'.
The article reported:
United Kingdom manufacturing companies have shown no significant improvement in meeting delivery times and managing work-flow in their plants over the last 10 years, according to a survey published yesterday by the British Institute of Management.
That report was not published in the 1960s or 1970s, but was published on 11 December 1986. It was a study conducted by the Cranfield school of management. That body and the British Institute of Management are in no way affiliated to the trade union movement or the Labour party. Such reports have not been published in magazines that are known to trumpet the views of the Labour party. Such reports can be taken as the expressions of totally neutral, totally professional people who have been looking for, but have failed to find what they expected from the hypothesis of increased efficiency supposedly arising from the cold shower of 1979–81. The slump of those years was engendered by the financial incompetence and blundering of the Conservative Government when they came to power in 1979. Either the Government did not know what they were doing or they planned a return to a 1930s-style slump to restore the management's right to manage—we do not know which.
I believe that we should try to get back to the idea of a United Kingdom in which the service and manufacturing industries are seen to be interdependent. I believe that I have a certain amount of qualification to put forward that view. I have grocer antecedents, just like the Prime Minister, although in my case it was a grandfather and not a father. I also have coalminer antecedents, like the leader of my party, but, again, a grandfather not a father. Therefore, I am congenitally—if that is the correct word—able to express the argument for the interdependence of the service and manufacturing sectors.
When I entered the House of Commons I became aware of the problem of the disunited kingdom. That is terribly well illustrated by the contrast between the Conservative and Opposition Benches. In the main, the central areas of the United Kingdom are represented by the Conservatives. In the main, the peripheral areas of the United Kingdom are represented by the Labour party, with one or two exceptions. When I came here I heard a great many rumours about the 50 Scottish Labour Members intending to break away—they called it a "democratic fission". Indeed, the day after I came to the House I misread a headline in The Independent that said:
US Congress reaches deal with North".
I said to myself, "Oh dear! The Scots are going their own way and now the north has decided that it would prefer

to be run by the United States because it does not go in for the sound money policies as harshly as the British Government".
However, having met the 69 new Labour Members and the 150 or so returning Labour Members I know that we believe in a United Kingdom. We hope that, over the next four years, Conservative Members will also come to realise that if we have an unhealthy manufacturing sector we shall be unable to run the country on the basis of the expansion in employment in insurance, banking and finance to a sufficient extent to carry this country through when North sea oil, a major economic resource, runs out.
The Chancellor of the Exchequer is exceptionally satisfied with the state of the economy as he observes it today. All that we can say to that is:
Beauty is in the eye of the beholder.
In my region we believe that, if that is true, it is also true that rigor mortis is in the eye of the pathologist. Economic rigor mortis is what is faced by at least 3 million pathologists even on the Government's figures, every day of their lives.

Sir Brandon Rhys Williams: The House has just benefited from hearing two highly competent and well-polished maiden speeches. It falls to me to congratulate both my hon. Friend the Member for Daventry (Mr. Boswell) and the hon. Member for Cardiff, West (Mr. Morgan).
Reg Prentice and Stephan Terlezki were personal friends of mine, as indeed they were of many hon. Members on both sides of the House. We miss them. On the other hand, we feel that we have been provided with some compensation, because we obviously have two lively and competent Members taking their places and we welcome them here today. I especially appreciated the fact that they both complied with the convention of not being too bitterly controversial on party lines in their maiden speeches. They brought to the House, perceptively and interestingly, the flavour of their constituencies. I am sure that we all wish them success in the pursuit of their interests on behalf of their constituents in future years.
Perhaps I can make a personal recommendation. I have always worked in the House on the basis of what I call the "Jericho principle". I remember the story of the troops of Joshua, who finally accomplised their objective of bringing down the walls of Jericho by going round and round remorselessly. I cannot help wondering whether, had they been so unwise as to sit down after going around the walls half a dozen times and said, "It is hopeless. There is no point in going on with this," an angel would have appeared and said, "You idiots. You only had to go round this walls one more time and they would have fallen down." If hon. Members have particular interests on behalf of their constituents, they should remember that if one keeps on and on, one has a chance of winning in the end.
As to the debate on what is now called the "summer" Finance Bill, I begin by welcoming the appointment of the Chief Secretary—I am sorry that he is not with us just now — because I had the agreeable experience of working with him during the Committee stage of what is now the Social Security Act, which sat for some 25 or 30 mornings last year. It was the most constructive and useful Standing Committee that I can remember taking part in. There was not one wasted minute. I am sure that my right hon. Friend will not forget what he learned from his


responsibilities in a huge money-spending Department—the ability to make graceful concessions. I hope that he will also do that in his new responsibilities in the Treasury.
I welcome also the return in the summer Finance Bill of some of the features that we liked when we saw them previously. The important new provisions on profit-related pay have not yet been fully appreciated by the public for their long-term implications. Possibly, in retrospect, those provisions will be seen as the most important aspects of this year's Budget. I also give a personal welcome to the changes in inheritance tax in relation to interests in possession, which followed some recommendations that I made on a previous occasion and which possibly illustrate the advantage of what I have described as the Jericho principle. I was delighted that the Treasury decided to accept the recommendations that I and others made last year.
I am glad about the non-reappearance—or at any rate the partial disappearance—of certain features which we did not like and which I criticised in the Standing Committee on the earlier Bill. The provisions on reinsurance to close were regarded as controversial in their original form. It seems that the Department has listened to the experts and is prepared to accept concessions before the remaining stages of the Bill are completed, which will satisfy all concerned. However, we shall continue to watch what happens, because we understand that new amendments are on their way to the House, and we shall have to see exactly what form they take. The Department has shown itself willing to listen to reason, and we are extremely grateful for that.
I also believe that we may have scored the point that we had hoped to achieve on the tax treatment of life insurance funds, but in the short time available to hon. Members to study the provisions of the summer Finance Bill it has not been possible quite to see what has happened to the capital gains of life insurance funds. From what I have been able to discern, it looks as though here, too, we have an extremely welcome concession from the Department. I hope that I am proved right in that analysis.
I have some serious complaints about the pensions provisions to which my right hon. Friend referred and which take up a large part of the Bill. I am sad about that because there is so much to praise in what the Government have done in recent years for provision for retirement. This Finance Bill undoubtedly carries forward the movement towards reform precisely on the lines that I personally have been recommending, and which is entirely in line with expert opinion.
I am glad about the change of emphasis in favour of money purchase retirement provision. That is obviously right. I have never liked the discretionary, or so called defined benefit schemes—which are also called final salary schemes—because it seems to me that collective funding of provision for retirement is entirely out of tune with our faith in the self-reliance of individuals and the maintenance of fairness in individual entitlement in funds accumulating for retirement benefit.
I am also extremely glad that the liberation of the saver is made possible by the opening up of so many new opportunities for saving within the favourable tax framework that operates on the principle of "Save now, pay tax later". That will be a valuable stimulus to the entire foundation of personal capitalism in the 20th century. But it has to be said that our present system does not produce an adequate living standard in retirement. Given the rate

of contribution going into many occupational pension schemes, the benefits will not be sufficient in the years ahead either, because a pension scheme is only as good as the contributions that go into it and their subsequent management.
If the contributions are intrinsically much too small to produce a first-class benefit, it is difficult to see how occupational pension schemes will rise to their responsibilities to maintain into the retirement years a reasonable standard of living to which the worker has become accustomed during his working life. We still have the tragedy of millions of people in retirement who, either immediately on ending work or soon afterwards, have to apply for supplementary benefit because their financial resources are not sufficient. That must be ended as quickly as possible.
As I have often also pointed out, the present system does not give real full transferability of the accrued asset to the early leaver, and I shall return to that subject in a moment.
Several points concern me on a quick reading of the Bill. In my view, the changes to the regulations governing maximum permissible pensions for short-service employees will not do what the Chief Secretary advertised in his speech—add to the mobility of labour—but will do quite the reverse. I am sure that hon. Members besides myself have already had deputations from people explaining precisely how damaging those clauses appear to be to senior people who are thinking of changing jobs in later life. That is precisely where the efficiency of industry requires that there should be absolute mobility of labour.
I do not like the special discrimination, again introduced in the Bill, against the higher paid in relation to lump sums. I do not understand why a figure of £150,000 should be proposed. What moral basis is there for introducing an area of discrimination above £1 50,000'? I have said before, and am bound to say again, that this whole area needs further consideration.
When we look carefully at the small print, I think that we shall find the same features as in the earlier Bill in respect of the change in the definition of final salary. That is being forced on schemes, and it is no good pretending that it is not a retrospective change in the conditions of employment. I am not at all certain that that is fair.
I also do not like the damage to entitlement under. occupational pension schemes suffered by people whose savings through additional voluntary contributions are substantial and go over the top; I do not like a provision that says that the rules of a scheme should be deemed to be different from what they actually are in certain circumstances. That does not appear to me to be healthy legislation.
I feel it necessary also to say a few words about the procedure that is being adopted, because the House is in danger of falling down on its responsibilities in regard to the supervision of the Executive in matters of taxation.
First, no fewer than 31 Ways and Means resolutions were tabled on 26 June, which were then moved formally a few days later, after 10 pm. Normally, of course, one has a lengthy exposition of the Government's intentions in the form of a Budget speech. The excuse, no doubt, for this new procedure this time was that so much of the Finance Bill was merely a repetition of what had been previously before the House. However, we now have 100 or more new


hon. Members who were not in the House when we considered the earlier Finance Bill and they deserve some deference from the Treasury.
More than that, when we take time to examine the new Bill, we see that there are many significant changes which have not been sufficiently brought to the notice of hon. Members. In the limited time available I have been trying to study the changes in the provisions regarding occupational pensions, in which I am particularly interested. One has to say that, again and again, clause after clause has been varied in a way that appears to have significance, and in some cases there are pages of new legislation in the Bill that were not in the Bill that was considered before the election. The House is at a disadvantage, in that there has not been sufficient explanation of the real significance of the Finance Bill.
We also have the problem that the Bill was published only last Friday, and it is therefore less than a week since it appeared in print. Now it is having its Second Reading. I am advised that the Select Committee on Procedure made some clear recommendations on that point—that the House should not proceed to Second Reading on the Finance Bill until there had been at least two weekends for people to study the provisions and make soundings as to their implications for interested parties. That has not happened in this case, and there has been a scramble by parties interested in pension provision—I can say from personal experience — to reach hon. Members with considered analyses of what the Bill contains. We are embarking on Second Reading too soon for the House to give the Bill the degree of analysis that is appropriate.
Moreover, from now until the Committee stage there is to be less than a week, as I understand it. That, again, is contrary to the recommendations of the Select Committee on Procedure.
When it was decided that part of the Finance Bill should be taken upstairs in Standing Committee and should not be analysed by the whole House, a number of experienced Members thought that that was a development that would weaken the discretion of the House in examining Finance Bills. However, it has become a recognised practice, and, having served on a few occasions on the Standing Committee examining a Finance Bill, I would be prepared to endorse that as a procedure, particularly when the House is dealing with a Bill that contains a number of highly specialised and technical amendments, as is the case this time. I am bound to regret the fact that we are not dealing at any rate with the pension clauses of this Bill in Standing Committee. Not many right hon. and hon. Members are deeply concerned about the small print of pension matters, yet virtually the entire population of the country will be affected sooner or later by what we decide on these pension clauses. The House will find it difficult to deal adequately with all these new provisions in two or three days on the Floor of the House, which, apparently, are all that we are to have next week.
Another matter, which is not germane to the Finance Bill, I must nevertheless mention tangentially. This week the Department of Health and Social Security has also tabled 20 statutory instruments dealing with the management of occupational pension funds, many of which are to come into effect this month. I believe that the vast majority of those are highly constructive and sensible, but I have not had time to study them sufficiently and I

am sure that no other hon. Member has had time either. As so many people will be significantly affected, it is wrong that the House should abdicate its responsibilities in dealing with matters of this importance. I have accordingly tabled prayers against each one of those statutory instruments and I hope that we shall have the opportunity of examining them before they finally come into effect.
I wish to make one last point about the present system of-dealing with occupational pension funds. At point after point the major Departments concerned have retained the discretion to act freely to create new regulations as and when they see the necessity. How can professional people who are dealing with these important matters, which involve substantial sums of money, operate effectively and competently as to the way in which they manage their funds and meet their responsibilities when they are working against such a continuously fluid background of detailed regulations? That does not appear to be right. The House is being bypassed and we should take a stand. We should insist on the opportunity of going closely into the implications of all the things that are put before us in the Finance Bill and in the statutory instruments. I am not prepared to accept that the gentleman in Whitehall invariably knows best, and certainly not when a chorus of gentlemen in Whitehall are speaking with different voices, as is unfortunately the case here.
I want briefly to read a passage from the annual report and accounts that were issued last month from the Institute of Actuaries, in which the president, who is an important man in this area, felt constrained to say some strong words. I shall read one paragraph from his opening statement:
The burden of legislation has been as heavy as in previous years. Last year my predecessor referred to the difficulties that arose from the lack of any co-ordination in the various aspects of supervision of pension schemes. The difficulties have increased as successive consultative documents have been issued by the Department of Health and Social Security in relation to the changes consequent upon the introduction of Personal Pensions; and the Inland Revenue issued its own proposals, which were subsequently included in the Finance Bill. Many of the difficulties are of greatest concern to practitioners in the pensions industry but some are of important professional consequence and these have been pursued vigorously, but, unfortunately, not very successfully, with the two departments. The loss of many of the clauses in the Finance Bill gives an opportunity for reconsideration and I hope that it will be used well. Notwithstanding the proposed earlier introduction of Personal Pensions, there must still be made time for the formulation of a simpler and more consistent regime in this area. Indeed, it is the seemingly conflicting objectives of the two main departments that gives rise to the greatest concern and causes unnecessary anxieties and pressures on the profession, on the practitioners and on pension scheme managers.
I trust that my right hon. and hon. Friends on the Front Bench will consider carefully those basic criticisms from a man who is at the head of the profession that deals with occupational pension matters.
Before I close, I want to say a few words about what I believe should be the objectives of a strategic review of occupational pension provision by my right hon. Friends. I hope, first, that they will look for ways of increasing the total flow of money into savings and of minimising the number of people who are dependent on means-tested support in their retirement years. Long term, we must put more money into these schemes. There must be a statutory basis for a minimum contribution, whether or not the schemes are apparently fully funded at any one time. If we accept that one's pension is one's entitlement, because it


takes the form of one's deferred pay, the employer should be putting funds into the scheme all the time. There should be no question of contribution holidays.
I see that when I spoke on the subject of pension contributions during the proceedings on the Finance Bill in 1970, I recommended the formula that we should set aside remuneration for pension provision at the rate of 10 minutes in every hour: 10 minutes on top of 50 minutes would make a 20 per cent. contribution. A 20 per cent. contribution for a pension fund is about what is needed to give a two thirds pension on retirement for the average person. The employers should certainly put in not less than 10 per cent., and the employees should be encouraged to put the balance of 10 per cent. to reach the formula of 10 minutes in the hour.
Short term, the Government must find ways of persuading well-funded schemes to uprate their benefits at least in line with inflation. That is a tax matter, because we give substantial concessions to these schemes, and I do not see why we should do so if they do not act in a way that is obviously in line with general social aims and public utility. The same applies to schemes that are not prepared to give fair treatment to early leavers. I shall not weary the House again with my specific recommendations on that, as I have repeated them a number of times. But I should like also to see extreme simplification of the administration of occupational pension schemes as an end in itself. That is really the responsibility of the Departments and of the Occupational Pensions Board. We cannot go on adding to the weight of interminable and increasingly complex regulatory provisions on the administrators of pension schemes.
I should therefore like to make this recommendation to the Inland Revenue. It should abandon the restrictions that relate to the definition of benefits. I know that that is a large recommendation and totally contrary to longstanding Inland Revenue tradition; but I am convinced that it is right and I believe that what I have said is echoed by almost all well-informed people in the profession. The restrictions should be put on the proportion of earnings that can be put into relevant schemes by employers and employees, not on the amount of money that can eventually be drawn out.
I believe, too, that the Inland Revenue should end the availability of tax exemptions for lump sums in respect of accruals of entitlement in future years. I know that that is not likely to be a popular recommendation, but I believe that it is undeniably right. If the Inland Revenue has the courage to adopt that recommendation, it will solve many of the other problems that bedevil occupational pension provision at present. I should also like the Inland Revenue to withdraw entitlement to the benefit of tax advantages in respect of future contributions by employers to funds which do not choose to give full transferability for the whole of the accrued assets to early leavers.
With regard to the DHSS, I believe that it should put a higher minimum contribution on employers, rationalise the limitations on maximum contributions at the upper end and proceed now to the final abolition of the state earnings-related pension scheme. In other words, the House is calling for an administrator of courage and competence, either at the DHSS or at the Treasury, to put a completely new regime in place with regard to occupational pension provision. I am asking for major reforms which — who knows? — may eventually, in retrospect, be known as the "Major" reforms. Those

reforms are long overdue and whoever on the Front Bench chooses to act in the way that I have suggested will, I believe, have universal support in the country, and will certainly enjoy mine.

Mr. Robert Maclennan: I, too, pay tribute to the two notable maiden speeches that have graced the debate. The hon. Member for Daventry (Mr. Boswell), whom I am glad to see out of the dangerous environment of the Ministry of Agriculture, Fisheries and Food and into the open on the Conservative Benches, may well provide quarry in the future. I was interested to hear his reminiscences about his home in Aynho, which is indeed a beautiful place. I attended a splendid ball there some 30 years ago, which gave me ideas above my station. The hon. Member for Cardiff, West (Mr. Morgan) was living proof of the virtues of bilingualism. The eloquence of his remarks today no doubt presages the Welsh eloquence on the problems of our divided nation to be brought to bear by him as it was by his predecessors.
It was interesting that both maiden speeches gave expression to the underlying theme of uneasiness in the debate. Both spoke of the interdependence of communities, the hon. Member for Daventry in relation to country and city and the hon. Member for Cardiff. West in relation to services and manufacturing. I believe that that division in our country has been the penumbra of the debate. The Minister, whose first appearance at the Dispatch Box as Chief Secretary we greatly welcome, did not refer to it, but it was mentioned by a distinguished former Financial Secretary, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon).
Most notably, it was mentioned in the remarkable speech of the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) which began to show how a large majority may provide more effective opposition to the Government from the Conservative Back Benches than from the Labour Benches. The right hon. and learned Gentleman spoke of the divisions in this country and the need to consider proposals such as the granting of national insurance contribution relief to employers in particularly disadvantaged areas. That proposal enjoys the support of the alliance parties and was, indeed, advocated in our election manifesto.
It would be gracious to follow the Chief Scretary's remarks by welcoming the significant retreat that he and his colleagues have made from the position that they took up before the election with regard to life assurance companies' chargeable gains. The original proposal would most adversely have affected those who had taken out life assurance "with profits" by raising the rate of tax from 30 per cent. to 35 per cent. The alliance made its strong opposition to that proposal plain when it was first suggested.
I cannot, however, welcome the particular arrangements for the treatment of chargeable gains by companies, which in future are to be taxed as income. Hitherto, whatever their size, companies have always paid corporation tax on chargeable gains at an effective rate of 30 per cent. The Chancellor sought to present his proposals as being of benefit to small companies, but I regret that that is not entirely so. Although the rate payable on the first £100,000 of income would be reduced to 27 per cent., the effect of making chargeable gains chargeable as income could push many small and medium-

 sized companies across the line into the £100,000 to £500,000 income band, thus raising the tax rate on their capital gains from 30 per cent. to 37 per cent. That would be a serious blow to many companies which could be regarded as small, and we shall wish to consider amendments to the proposal in Committee.
Although a number of the proposals were adumbrated previously, it seems remarkable that the Committee stage should be brought forward to take place as soon as next week. I doubt whether that will give the House the full opportunity that it would wish for consultation with interested bodies outside about the specific impact of some of the extremely important and detailed provisions.
I shall not linger on the provisions proposing changes in the arrangements for the taxation of private pension schemes. The proposals are designed to encourage employees to build up their own portable pension plans and they are broadly welcomed. I believe that they will help to remove a possible bar to mobility in employment, which the alliance parties regard as essential to the achievement of economic growth and a competitive industrial position.
The new Labour party spokesman, the hon. Member for Dagenham (Mr. Gould), made a number of criticisms about the impact of the proposals on occupational pension schemes. As he did not substantiate those criticisms at all, his heavy breathing on the subject requires careful examination. I thought that it was negativism for its own sake. The Government have made a useful move in this area and, in view of the amendment to schedule 3 announced by the Minister today to allow free-standing portable pension arrangements to be used to produce tax-free lump sums as well as income on retirement, the provisions seem likely to encourage employees to use additional voluntary contributions to create their own private portable top-up pension arrangements rather than locking themselves still further into an employer's pension scheme. There is much to be said for that.
I want to consider the inheritance tax provisions in the Bill. The Government proposed a noteworthy change in the arrangements introduced only last year when they almost completely abolished the taxation of all significant lifetime transfers of wealth. However, there was an important exception to that abolition in 1986. That provided that lifetime transfers into trusts with an interest in possession remained liable to inheritance tax, as indeed did movements of property out of such trusts. The Bill proposes the removal of that exception. The change was not defended in the Budget debate on any general grounds. It was merely defended on the specific ground that it would assist small businesses.
Had that really been the Government's intention, there were more obvious and direct ways in which that objective could have been achieved. The Government could, for example, have further increased the scope and extent of business property relief. In fact, the consequence of the relaxation of the trust rules in the Finance Bill could equally easily facilitate the handing down of assets that are unconnected with small businesses, including cash, quoted shares and real estate. The general relaxation of the trust rules sharpens the impression that inheritance tax is now virtually a voluntary tax. As the proposals are not targeted

to give relief to small businesses, they are scarcely justifiable on the ground that they may, in a limited number of cases, have that effect.
The Bill raises a matter of principle which perhaps even the Chancellor will recognise offends against the accepted practice in respect of retrospective legislation. There are two separate cases in the Bill where amending legislation is proposed to prevent retrospectively any other taxpayer from benefiting from decisions against the Inland Revenue taken on appeal. I understand that that is a completely new practice. While occasionally in the past uncertainties that could give rise to loopholes have been dealt with retrospectively, it does not seem previously to have been the practice to legislate retrospectively against the decisions of the High Court or the commissioners on tax matters in this way.
As recently as July 1986, the Treasury published the so-called "Taxpayers' Charter" which, inter alia, assures the taxpayer:
You will be treated in the same way as other taxpayers in similar circumstances.
The cases covered by clauses 62 and 80 of this Bill seem to infringe that "Taxpayers' Charter". I give notice that we will want to consider in Committee both those examples of unacceptable and inequitable restrospective legislation.
I want now to discuss what the alliance parties undoubtedly regard as by far the most significant proposals in the Finance Bill — the arrangements designed to encourage profit-related pay. The alliance parties—and perhaps especially the Liberal party—can fairly claim to be the progenitors of the developments in Government thinking. We have long advocated profit-sharing and profit-related pay, both as an important means of seeking to ensure the identification of those who work in particular companies with their corporate objectives, and in spreading the benefits of corporate success among all those who have contributed to it.
Announcing those proposals in his Budget speech and the succeeding Green Paper, the Chancellor used an additional argument for linking cash pay to profitability—that employers might feel less obliged to shed labour in a bad patch because pay costs would decline during such a period because of the profit-related mechanism. The Chief Secretary to the Treasury repeated that argument today. I find that a less compelling argument because, certainly in the short term, it will take some time to establish confidence that profit-related pay is not a means of operating a wage restraint policy. It would be a pity if companies failed to establish profit-related pay schemes because of such initial anxieties and the Government would do well to focus more on the profit-sharing and less on the loss-cushioning consequence of profit-related pay schemes.
I have two major criticisms of the Government's proposed schemes for introducing profit-related pay. First, the schemes produce no direct tax benefit to the employer. There is, for example, no employer national insurance contribution rebate on profit-related pay. It would be our intention to provide employers with such an incentive to set up administrative and negotiating machinery necessary to commence those schemes and to promote further their beneficial effects. The alliance parties believe that the Bill should provide for a rebate on employer national insurance contributions on the tax-qualifying profit-related pay.
As I understand it, the Government's proposal is that, provided certain conditions are satisfied, the employee can be exempted from income tax on half of profit-related pay to the point where profit-related pay is the lower of 20 per cent. of pay, or £3,000. In my view, we should offer an enhanced tax relief on the tax-qualifying profit-related pay element of total pay, which we believe would act as an incentive to employees to commit a higher proportion of their pay to profit-related pay.
Prior to the general election, the two parties of the alliance proposed a scale that would have given a greater than 50 per cent. income tax relief and reduction of the employer's national insurance contribution on tax-qualifying profit-related pay where that pay was over 10 per cent. Where it was over 15 per cent. of pay, we recommended total tax relief and total remission of the employer's NIC liability on the tax-qualifying PRP element. I believe that employers will be more willing to establish such schemes if we follow that route because it will provide an incentive to contain the growth of unit costs and, indeed, act as a catalyst to improve pay bargaining arrangements. It could lead to a virtuous circle, with the more efficient and profitable employers paying a great proportion of their pay costs through PRP and thereby obtaining the maximum percentage of employers' NIC benefit, thus again reducing their costs.
However, there is a further serious criticism of the Government's plans to which I must draw attention which could vitiate the effectiveness of even their limited proposals. Under the provisions of paragraphs 13 and 14 of schedule I it is required that at the commencement of the scheme there must be the prospect that, if profits remain unchanged, profit-related pay will amount to at least 5 per cent. of the total pay of participating employees. That provision could mean that in practice, to take advantage of a PRP scheme, an employer would have to pay out an additional 5 per cent. in total payroll costs. The employer would alternatively have to persuade his employees to accept a cut in their basic rate of pay, or, with inflation running at 5 per cent., to hold his labour costs steady by not increasing the basic rate of pay. That would appear to me to be unrealistic and to operate as a substantial disincentive to the adoption of PRP schemes.
It is our view that profit-related pay should become an increasingly important part of the remuneration of company employees and that, indeed, in time it will help to contain unit labour costs. However, if the project is to get off the ground, it requires more than token approval. Strong incentives to employers are needed, not the somewhat intangible benefits that the Chancellor appears to be proffering. None the less, if the Government approach the Committee stage in a constructive spirit—as we shall—we can look forward to a useful innovation with which the alliance parties will be very proud to be associated.

Mr. Quentin Davies: It is with a curious mixture of pleasure and awe that I rise to speak for the first time in this Chamber. It has always been the greatest honour to be elected to this House. It is a special honour for me to have been elected by the electors of Stamford and Spalding in south Lincolnshire and to have been sent here to succeed Sir Kenneth Lewis.
Sir Kenneth Lewis was a Member of this House for nearly 30 years and was, I believe, much loved and

respected here. I would be intensely surprised to learn that he had a single enemy in this House. Certainly in south Lincolnshire and in Rutland—which he also represented for so many years—he has only friends and admirers.
Sir Kenneth Lewis now enjoys a position of great distinction in my part of the country. That reputation is based on three things. The first is the tremendous dedication and ability with which he defended the interests of his constituency down all those years. I lost count long before the election of the number of people and businesses I encountered whom he had assisted, often very decisively. Secondly, he gained a reputation, not merely locally but I know also with the national press for exceptionally astute and sound political judgment. The third reason is perhaps the most important of all. Throughout his long political career, he always faced every issue with the utmost honesty and straightforwardness. He was always, above all, his own man. Everyone always knew where they stood with him. It has been a great advantage for me to stand for Parliament in a constituency where the reputation of the profession of politics stands so high, thanks to the work and example of Sir Kenneth Lewis.
I hope that I may be forgiven for making a few remarks about my constituency, which, in my view, is insufficiently well known. Very few of those who speed up the A1 to the north of England or to Scotland realise that in bypassing Stamford, only a mile away, they are bypassing what Pevsner describes as one of the loveliest and I describe unhesitatingly as the loveliest, stone town in England. Stamford is an ancient town. It had a college long before the university of Cambridge was founded, and it maintains, its fine educational institutions and traditions to this day.
Stamford lies in the midst of the rolling uplands of south Lincolnshire. The eastern part of my constituency, which covers a large part of the Fens, has as its natural centre and capital the town of Spalding. Spalding is also an ancient town, also lying on the banks of the Welland, boasting in the Gentlemen's Society the oldest literary and scientific society in the kingdom. But Spalding has also become known, first nationally and now internationally, as the capital of the bulb-growing industry in this country. Its flower festival and tulip parade are now known across the globe.
I have said that too many people bypass my constituency. I am glad to say, however, that we have not been bypassed by the years of Conservative prosperity. Businesses are booming; unemployment, although still far too high, is now in single figures and continues, most encouragingly, to fall. The major employer is agriculture. Agriculture is an industry that I believe is second to none in this country in its record of efficiency, productivity and technical improvement. The trouble with success, however, is that it is too easily taken for granted. Worse still, those essential foundations of success—the risk-taking, the investment and the hard work — can too easily be taken for granted, neglected and allowed to decline.
Agriculture has served this country exceedingly well. Indeed, I believe that no industry deserves better of this country. And no industry, if it were undermined through the deliberate erosion of the framework within which it has prospered, would bring in the train of that decline more damaging consequences for employment, for our balance of payments and for our national prosperity. I may well seek to address the House on that subject again later in the Session.
I would not have you think, Mr. Deputy Speaker, that Stamford and Spalding is a purely agricultural area. On the contrary, the prosperity to which I have referred is based on a wide diversification between different sectors of economic activity. We have in Stamford the leading diesel manufacturers in the country. The great plants of Mirlees, Blackstone, Newage and smaller specialised diesel companies such as Tempest Diesels, send their diesel engines to the far corners of the earth. Elsewhere in the constituency, we have successful young electronics companies such as Park Air Electronics and Autocast. We have in Bourne a very successful printing industry represented by Tudor Labels and Warners. Spalding is, or should be, the natural capital of our country's food industry. British Sugar and Smedleys have large plants there. But two great British food manufacturers are inextricably linked with the name of the town of Spalding: Geest, and George Adams, famous producers of Lincolnshire pork pies and meat products.
I have already referred to our prosperity. Indeed, we have begun to encounter some of the problems of success. One of them is a lack of certain essential skills in some of our industries. In recent months, businesses in my constituency have found it impossible to find electronics apprentices, skilled printers or skilled bricklayers. The same applies to a host of trades associated with computers and information technology. Nevertheless, the overall level of unemployment is still too high. That is the tragic paradox that we face, not only in south Lincolnshire, but throughout the country.
At the last general election, there was an overwhelming consensus between all political parties that the further reduction of unemployment was the necessary first task facing the new Government after election day. There was no dispute between the parties on the overwhelming importance of that task; the dispute was merely about the most effective means of grappling with it. The electorate had to choose which party it believed was most likely to be able to do that. It places a great responsibility on my party—a responsibility that I personally welcome—to make it clear that that confidence was not misplaced.
Anyone who looks at the money supply figures or the balance of payments figures will be immediately convinced that, whatever causes us a continuing too high level of unemployment, it is not macro-economic demand deficiency. I am well aware of the methodological difficulties involved in deriving the monetary aggregates and in interpreting them. Rather less work has recently been put into examining the balance of payments as an effective measure of the balance of demand. Indeed, there are traps in doing so, not least the fact that sales of services are aggregated with investment income from abroad in the invisible part of the statistics.
Nevertheless, however we look at any of those statistics, we come to the same conclusion: it is not macro-economic demand deficiency, but supply side deficiencies from which we suffer. They are many, they are various and they are certainly too numerous and too extensive. There is the obstacle to geographical mobility posed by the council house waiting list system and the effective absence of a private rented sector. I am delighted and greatly encouraged that the Government have made it clear that they will tackle that problem in the present Session.
There is the further problem of continuing restrictive practices and artificial obstacles to the growth of productivity. Again, that is a matter we intend to tackle in this Session, and I thank heaven for it. There is the more delicate problem of the employment trap for those currently living on benefit. The Government, with great courage, have decided to face the problem in the current Session at least so far as those in the 16 to 18-year-old bracket are concerned.
There are the supply side deficiencies created by the failings of our education system; the fact that we do not always turn out people with the skills required by the businesses that are there to employ them. That is a major problem and, again, I thank heaven that the Government will tackle that in this Session.
Beyond that, there is the equally important, or even more important, matter of continuing in-work industrial training. There was nothing about that in the Gracious Speech, but I believe that during this coming Parliament it will be essential that British industry resolve to spend more time and more resources on it, and to give greater priority to that essential aspect of our relative continuing industrial weakness. Even against the background of encouraging prosperity, none of us would wish to take anything for granted or wish to cease to grapple with what deficiencies remain.
However, when one looks at employment, there is one fundamental matter one cannot avoid facing. I have always believed — I would have thought that it was perhaps the most non-controversial and elementary statement that I could make on the subject in the House—that employment, or the demand for labour, was a negative function of the cost of labour. Had I not heard, with more than some astonishment, the remarks of the hon. Member for Dagenham (Mr. Gould), I would never have dreamt of inflicting on the House such a gratuitous platitude. I do so now, not because I have the slightest intention of taking issue with him—it would hardly be appropriate to do so in my maiden speech—but because I am convinced that, on reflection, he will agree with me.
I believe that in every corner of the House there will be agreement with the proposition that firms continue to recuit and employ as long as the value of the marginal output of labour is greater than the cost of that labour. It follows that a sure way of increasing employment is to reduce the real product wage, either by increasing productivity or by decreasing wages themselves. The fact that productivity is favourable to employment should not surprise anyone. That is why, in those countries which have consistently had the fastest rates of growth of productivity—Japan, the Federal Republic of Germany and Switzerland—there has also consistently been the highest level of employment. That is why, at a time when we have had unprecedented rates of growth in productivity in this country, we have, since the 1983 election, enjoyed an unprecedented growth of employment.
I believe that my remarks about productivity will be entirely non-controversial. I am certainly not going to make the controversial suggestion that we should be reducing wages—not, however, merely because I do not wish to be controversial, but because I would not dream of supporting such a proposal. Any such proposal would create an outcry, not merely in the House, but throughout the country, which would be thoroughly understandable.
But if a way could be devised of gaining the benefits for employment that would flow from a reduction in wages,


while avoiding the obvious disadvantages of such a move, I believe that the House would he sincerely, profoundly and permanently grateful to the begetter of such a concept. And that is precisely what has been achieved in the proposals on profit-related pay in the Finance Bill, so ably moved by my right hon. Friend the Chief Secretary.
Much has been said this afternoon about the advantages of profit-related pay. I agree with all that has been said on the subject. Of course, an important advantage that will flow from it is further to identify the interests of the work force and staff with the success of the firm for which they work. Of course, an advantage will be that profit-related pay is likely to reduce the extent of any fall in unemployment in a new recession. However, I profoundly hope that no recession is in sight, and that that advantage will therefore remain purely academic for a long time. But the most decisive advantage of profit-related pay is that, all other things being equal, it will lead to the generation of new jobs and to an increase in employment. It will do so for the simple, technical but utterly compelling reason that the profit-related element in pay will henceforth be regarded by firms not as a part of fixed costs, but as a part of their variable costs, even in the shortest term, and that it is the lower, fixed, level of cost on which firms will base their recruitment decisions.
It is a convention in the House, to which I wish to subscribe, to remain entirely non-controversial in my remarks this afternoon. Given the consensus to which have already referred on the overwhelming importance to our country of further reducing unemployment and making sure that that favourable process continues in the years ahead, I believe that a measure that is so obviously and directly designed to achieve that end cannot but enjoy the overwhelming and enthusiastic support of all parties in the House.

Mr. Calum A. Macdonald: I am obliged for the opportunity to make my maiden speech. I understand that it is in order for one maiden to compliment and congratulate another, and I am happy to do so.
The speech of the hon. Member for Stamford and Spalding (Mr. Davies) was able and eloquent, but I am sure that he will not be surprised to hear that I disagree with some of what he said towards the end, particularly his remarks about the relationship of unemployment to the cost of labour. It reminded me of a theory that I have heard from Conservative Members from time to time. It can be distilled as the thought that the poor are not working because they are paid too much, and the rich are not working because they are paid too little. I have always thought that that was a curious theory. In fact, it struck me as more of an excuse than a theory. I learned a great deal about the constituency of Stamford and Spalding and I hope that, by the end of my speech, the hon. Gentleman will have learnt something about the problems in my constituency.
I shall begin by paying tribute to my predecessor, Donald Stewart, who represented the Western Isles for 17 years. In that time, he grew to be well loved by his constituents and I think that I am right in saying that he was well liked and greatly respected in the House. Donald was an honest, dignified and faithful servant of the Western Isles and it is a great honour to succeed him.
Mine is a unique constituency, for many reasons. Not least is the fact that the first language of the majority of my constituents is not English, but Gaelic, which the English curiously pronounce as "Gaylic". It also happens to be the oldest living language in Scotland. My constituents hope that this Parliament will help to give Gaelic the recognition and the status that it deserves. With the permission of the House, I would like to express that same hope of my constituents in their own language Tha mi'n dochas anns an bliadhnaichean a tha tighinn gum bi a' Pharlamaid seo na caraid don Ghaidhlig agus gum cuidich i ann a bhith ga neartachadh agus go gleidheadh. I thank the House for its indulgence.
Today we are discussing the Finance Bill. There are many aspects under its umbrella that we could discuss. Most obvious, perhaps, are the effects of public expenditure cuts in the Islands over the past few years, and the way that the local authority has been forced to cut services because of the lack of money from central Government, as well as the effect on social services, the maintenance of roads, as so on. I would like to talk about three examples of taxation policy — taken in its most general sense — affecting my constituents which they hold, and I agree with them, to be oppressive and iniquitous in their operation. I hope that, by the end of my speech, hon. Members, particularly Government Members, will have some understanding of why I used those adjectives.
The first taxation policy I want to talk about concerns crofters. Crofting, along with fishing and the manufacture of Harris tweed, form the traditional economic backbone of the Outer Hebrides. The success of crofting is that it keeps people on the land. It does not provide a high cash income but it does allow people to supply food, fuel and shelter for themselves. Perhaps more than that, it allows the dignity of labour, without which communities can become disheartened and demoralised, something sadly seen throughout the country today. Crofting encourages and helps people to stay on the land. Indeed, parts of my constituency are among the most heavily populated rural areas in Europe.
Crofters complain of two taxes. First is the poll tax. It is not directly germane to the Bill, so I will just say about it that it threatens a severe blow to the crofting communities. When the Bill to introduce the poll tax in England and Wales is defeated in the House with the help of the more rational and independent minded Government Members, I hope that its defeat will be quickly followed by the abolition of the poll tax legislation for Scotland.
A subject that I particularly want to raise in relation to crofting is not a tax as such but rather a tax allowance. I refer to the inequity of the present system of tax allowances for private forestry. At present, tax incentives and grants to private forestry cost the Exchequer some £10 million a year. It is certainly not the crofters who benefit from this massive expenditure of public finance. The public subsidy to encourage the planting of trees is available only to higher rate taxpayers. There are precious few crofters among them. What is the economic gain to the nation from this vast public subsidy? Precious little, if we are to believe the report of the National Audit Office presented to the House on 4 December last year. There is no economic gain, but there is a great deal of environmental loss.
Crofters are discriminated against in their efforts to plant and grow trees — efforts that are much more


environmentally sensitive and much more agriculturally useful. As the law stands at present, any trees planted by a crofter on his own croft belong not to him or to her, but the landlord. This difference in treatment between rich tax dodgers—people resident in the south of England—and ordinary crofters living on the land, is clearly unfair and unjust, and demands correction. Ultimately, the solution must involve changes in land ownership in the Highlands and Islands, but in the meantime it would be good to have a change in the law to give crofters ownership of the trees they plant on their own land and a change in the present system of tax allowances away from subsidising tax-dodgers towards helping crofters and other hill farmers.
I am delighted to find that I have the support of a newly appointed Member of the Government Front Bench, the hon. Member for Stirling (Mr. Forsyth), who is now the Under-Secretary of State for Scotland. He said in this place last January about the present system of tax allowances:
The effect is to exclude local people from the business of planting trees and to bring in a new generation and class of absentee landlords, consisting of pop stars, snooker players and others who are anxious to convert high marginal tax income into a tax-free capital gain."—[Official Report, 26 January 1987; Vol. 109, c. 157.]
I hope that the hon. Member will stick to his guns in his new responsibility as Under-Secretary, but I see that the responsibilities for agriculture and forestry have been curiously divided. The Under-Secretary has been denied responsibility for forestry, which would naturally complement his responsibility for agriculture, and that seems to bode ill.
I want to look next at an unfair and iniquitous levy about to be imposed upon my constituents who work in the fishing and fish processing industries. In February of this year, the then Secretary for Transport announced his intention to lay an order before Parliament to increase light dues by almost 14 per cent. and to extend its application to fishing vessels over a certain minimum size. People have complained for years about the heavy burden that light dues impose on merchant ships. No other European country save Greece and Ireland imposes a similar burden. The Government's answer to the problem is to place the burden on the shoulders of fishermen. The Government's order is economically foolish and unjust. It is economically foolish because it places our merchant ships and fishing vessels at a disadvantage compared to those of our competitors. It is unjust because those light dues are not to be levied upon pleasure craft, yachts or the Royal Navy, which equally use those services. The Leader of the Opposition has prayed against the order and I hope that we shall have a chance to debate it at a later date.
Yet another unjust and intolerable levy upon hard work and enterprise in my constituency, about to be imposed by the Crown Estates Commission, will affect fish farmers in the Highlands and Islands. Crofting and fishing are traditional staples in my constituency. Fish farming is a highly promising sunrise industry. It has produced over 1,000 primary jobs in the Islands and the anticipated production next year will be worth some £100 million. Shellfish farming has also been developed, with similar prospects. This resource, valuable both in terms of employment and cash income, needs to be developed and managed so that people living and working in the Highlands and Islands benefit from it.
It is an outrage that total control over fish and shellfish farming should reside with the Crown Estates Commission—a secretive, unelected quango of financiers and estate owners who have no local contacts, no local knowledge and who are not accountable to the communities they affect. It is even more outrageous that the Commission should abuse that power to impose a levy upon the local people who built up the industry through their hard work, initiative and enterprise. The Commission plays, and has played, no constructive role in the development of the industry. It adds and contributes nothing. It produces nothing. It is simply a parasite upon the sweat and toil of my constituents and the constituents of other Members in the Highlands and Islands. My constituents demand an end to the situation. We want the right to control our own natural resources. I hope again that we will have an opportunity to debate this at a later stage.
I have described three taxes or levies that the Government have done nothing to correct and that the Finance Bill does nothing to correct which are unjust, unfair, and, most strikingly, place a severe burden upon the hard-working and enterprising people of my constituency.
I think that these three examples help to give the lie to the Government's claim that they are in business to help ordinary, enterprising, working people. They expose that claim as the humbug that it largely is. My constituents want only to make a decent, honest living. They want to work hard and make a go of it. The Government oppose these aspirations. The Opposition support them. I plead for a change of mind on the Government's part, but I know in reality that that is futile. My right hon. and hon. Friends and I can only hope for a change of Government.

Mr. David Howell: I join my hon. Friends in congratulating the maiden speakers whom we have heard this afternoon. My hon. Friend the Member for Daventry (Mr. Boswell) worked closely with me in the 1970s in laying the foundation for the wider ownership policies that are now at the centre of the Government's strategy. His skill in blending knowledge of agriculture, the rural economy and finance will be severely tested and much needed in the coming months of debate.
The hon. Member for Cardiff, West (Mr. Morgan) made an excellent maiden speech. I am grateful to him for mentioning his predecessor, Stefan Terlezki, who was certainly an adornment to the House and someone whom we all admired. I hope that we shall see him back in this place before very long.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) made a thoroughly eloquent and excellent speech in which he paid a great tribute to Sir Kenneth Lewis. In my rather patchy parliamentary career, my first dramatic promotion was when Ken Lewis recruited me almost on the first day that I came to the House into the parliamentary bowls team, which was due to play a match at Hurlingham. We lost, mainly because I had never played bowls before. I have never played bowls since.
We have heard also from the hon. Member for Western Isles (Mr. Macdonald), who represents a marvellous and beautiful part of our kingdom. He made a clear and eloquent plea on behalf of his constituents. The feature that has been puzzling me since the general election is the speed with which the votes were counted and announced


in the hon. Gentleman's constituency on the night of the election. We know about getting results announced quickly down in the south-east, and I shall have to find out from the hon. Gentleman later how the result was arrived at and declared so quickly in the Western Isles.
I read in the newspapers the other day that the hon. Member for Dagenham (Mr. Gould), who spoke from the Opposition Front Bench, was determined to introduce into the Labour party "voter-friendly policies" and it seems that he has made a not very happy start in this new endeavour. Within the heart of the Bill are two policies that are extremely friendly to the voter and extremely popular. There is the policy of employee involvement in the profits and success of a firm which is becoming immensely popular, and the policy to promote wider personal and direct ownership of shares and assets through the development of personal pension schemes, which is also becoming extremely popular policies. It is a pity that the hon. Member for Dagenham was not able to give even a glance of approbation or encouragement to these policies.
The scene became more ominous when the hon. Member for Dagenham seemed to be falling straight into the fallacy of regarding the United Kingdom economy as a single plannable unit, and muddling throughout his speech the concept of a national economy with that of the Government budget. That is a mistake that has been made by every Labour Government since the war, with disastrous results. I urge the hon. Gentleman to get his thinking straight on the nature of our economy and the difference between the economy and the Government's finances. He must do so at an early stage, or there will be considerable difficulties that perhaps will be as great as those by which his predecessor, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was finally overcome.
I wish to refer briefly to the two jewels in the Bill, of profit-related pay and the proposal to move to a concept of two-tier pay, and the more direct link with wider personal ownership in the form of the personal pension scheme proposals.
The idea of profit-related pay had a rather bad start in the public debate a year or so ago, when Mr. Martin Weitzman began to air his ideas in public and some of us had the chance to discuss them with him. It is important to emphasise that profit-related pay is not the answer to unemployment. It may not even be what Mr. Weitzman was claiming, a scheme to change the nature of the wage bargain. It is not that; nor is it a substitute for wage cuts. I agreed with those on both sides of the House who warned against seeing the idea of two-tier pay and an additional tier of pay being related to profits as a substitute for wage cuts. I feel strongly that the idea will develop and grow strongly over several years, but that will happen only if it is seen as an addition to existing levels of wage remuneration for the future. Let employers who wish over future years to add to the total remuneration package do so by introducing the additional bonus tier. If they do so they will find that there is no resistance to the concept. Indeed, I believe that it will be welcomed by trade union negotiators and by employees generally.
The bonus system has been adopted in Japan, and on the whole it works rather well. That is why almost all employees in Japan nowadays are involved in a system that provides bonuses of up to about 25 per cent. after 10 or 15 years of employment. As my hon. Friend the

Member for Stamford and Spalding rightly said, this acts as a shock absorber when there is a downturn or minor recession. That is the approach that should be used in promoting profit-related pay and in building on the tax incentives that are proposed in the Bill. Bonuses should he seen as an additional incentive for future wage increments and not as a cover for wage cuts.
I greatly welcome the important development of personal pension schemes. For some years, there has been a vast movement towards individual ownership. The need for it was recognised a decade ago, and we have built on that steadily ever since. Pensions cannot he immune from the trend towards personal and individual ownership. The relevant clauses will extend to all employees the benefits that have been available to some limited extent to the self-employed through personal pension plans. They will not create an immediate and direct sense of share ownership, but there will be a less indirect sense of ownership than that which prevails in the normal personal occupation scheme, where the future pension beneficiary does not have a clue what assets are being held in his name for his future pension. A valuable start has been made, but it is not nearly enough.
We have more shareholders in Britain now, but, as the stock exchange said recently, 51 per cent. of all shareholders hold shares in only one firm per person. That is not the basis of a deep-rooted shareholding democracy. I am not enamoured either of the idea that shareholding democracies should be built on shareholdings in large public monopolies that have been turned into privatised monopolies. That is not a sound long-term basis for spreading share ownership. To adopt another negative note, I do not feel that the personal equity plans that were proposed by my right hon. Friend the Chancellor of the Exchequer in a previous Budget even scratch the surface of what is needed. As I predicted at the time, they have not been a huge success. I do not think that they begin to rise to the level of what is required.
We must think seriously of the Loi Monory, which was introduced in France in 1978. It offers a front-end tax relief to investment in shares to millions of investors and workers. It has brought millions of French people into the shareholding democracy and has been a great success. Similar schemes have existed for a long time in Belgium, Germany and Sweden. The Swedish scheme has had the effect of making one sixth of the population into investors. In the United States, individual retirement accounts still receive a heavy incentive. That has not been removed by the current tax reforms, which have run into some difficulty. Indeed, the incentive has been strengthened. Such schemes exist around the world. We do not yet have a pattern similar to them, except in the sense, obviously, that pension contributions are completely tax-free.
Those are the areas in which we must go much further. The long-term aim must be to raise the level of personal savings so that we are no longer a society that relies on forced Government savings or on institutional savings alone. We must raise the ratio of personal savings. We must press on with the strategy of creating an economic democracy. If we are to put the theme of wider ownership at the centre of the Government's policies, we must show how it links with and helps to solve the problems of cities and city regions and unemployment in areas in which social problems are worse and must be cured. Those tasks lie immediately ahead. The Finance Bill is a good, small start, but there is a great deal more to do.

7 pm

Mr. Austin Mitchell: I congratulate the numerous maiden speakers whom we have had the pleasure of hearing today. They will bring interest, variety and new capability to our debates. I look forward to hearing from them in future debates. The Finance Bill presents a useful occasion for hon. Members to make maiden speeches.
It is difficult to refer to the Bill, there is so little in it. It is possible to praise it with faint damns, as the right hon. Member for Guildford (Mr. Howell) has just done, but it is difficult to deal with it at length because it is a type of trim bin. It is as though a spare parts surgeon is now busily stitching all the organs that he left out at the last operation back into a body at a time when we need a new Finance Bill and a new Budget to deal with the country's economic problems after the election.
This Finance Bill does not move chairs around on the decks of the Titanic; it is so minute and unimportant that it resets the fish-knives on the tables of the Titanic. The Finance Bill should have dealt with the real problem of British manufacturing. It is a problem on which the economic survival of those of us who inhabit the real world in the parts of the country that make things and sell them to the rest of the world acutely depend. Under this Government, a disastrous blow has been given to British manufacturing capability, and that blow is still being suffered. The problem is still getting worse. Our share of world trade in manufacturing which was 9·1 per cent.—too low—in 1979, had fallen to 7·4 per cent. at the end of last year. Last year, our relative volume of exports to imports of finished manufactures, which in 1980 was near balance, was 71 per cent. of the 1980 figure. Imports of British finished manufactures are now 48 per cent. of manufacturing output. The comparable figure for West Germany is only 26 per cent., for France it is 28 per cent. and for the United States it is 10 per cent. That is the extent of the problem.
The Government have decimated much of our industrial base. In decimating it, we have shed 1·8 million manufacturing jobs, which is the basic cause of high unemployment. Our manufacturing output is still 5 per cent. less than it was in 1978 or 1979. Indeed, the frightening thing that is going on now was highlighted by my hon. Friend the Member for Dagenham (Mr. Gould). We are now seeing a net disinvestment in manufacturing. It is the first time that that has occurred in British industrial history.
In each of the past six years, British industry has invested less in fixed assets than the amount set aside for depreciation. In other words, net domestic manufacturing capital formation at 1980 prices, which, under Labour, was £1·4 billion in 1979—an all-time high—has been negative each year since 1981. Indeed, in the period 1974–79 under the Labour Government, United Kingdom manufacturing invested £140 for every £100 of depreciation, but in 1980–85, it invested only £85 for every £100 of depreciation. We are living on the seedcorn. Instead of investing, we are actually pulling out. In that sense, we are the world's first undeveloping country.
That is no way in which to build a future. It is no way to provide future growth, jobs, or survival in a world that is becoming tougher and more competitive. That is directly due to Government policies, particularly to high interest rates. Hence the value of sterling is higher than it should

be. This produces the problems of manufacturing. The Government are building a world not for manufacturing to live in but for the Geoffrey Colliers to manipulate—not the colliers down in the pits, but the Colliers who do the insider dealing and the funny money manipulating.
That is the world that is being created by the Government. It is not a world of making things, providing jobs and selling things to the world. It contrasts totally with the rosy picture that the Government painted at the election. When it comes to the election figures, and economic figures particularly, that are put out by the Government, there are lies, damned lies and Tory statistics.
We now have a new situation in which the Civil Service—in many respects the best brains in the country—no longer advise on policy. That role has gone. The will is now coming down from the top. So the best brains in the country are being used to devise excuses for second-rate policies dictated by third-rate minds. In other words, we have awful policies and damned good excuses. We saw excuses manipulated at the election. We saw all the figures about the growth of the British economy compared with the economies of West Germany or Western Europe. The average growth figure for the eight years of the Government has been 1·4 per cent. a year. Over that period, it has been the lowest in the OECD, if one excludes oil and gas.
According to the May OECD economic indicators, our inflation rate is one of the highest in the OECD. Our unemployment level is one of the highest among the OECD, despite the Government's desperate fiddles. As for the Government's figures on productivity, they have given the same advice as I would have given to the Yorkshire county cricket club. That advice is, "If you have a problem with your batting average, shoot the last four batsmen and your batting average will go up marvellously." The Government say that productivity has gone up, but all they are saying is that they have closed more capacity than any other country in Europe.
That was prettied up for the election by something that the Government did not expect, did not want and constantly fought against, and that was the fall in the pound consequent upon the fall in oil prices. That fall was certainly not anticipated in the 1986 Budget forecast, but it meant that there was an economic revival, and it was supplemented by an enormous increase in the money supply, which continued through last year and the year before. As a result—the Finance Bill should cope with this—the Government now find themselves in a trap. It appears to any outside observer—Opposition Members must be outside observers in this respect—that we are pegging ourselves to the European monetary system. We are working in terms of between 2·80 and 3·00 deutschmarks to the pound. The rate now is 2·97; at the top of a range that is too high to be maintained anyway.
It seems to be the essence of Government policy to keep the pound as high as possible to keep inflation down. Certainly, that is what the Prime Minister means by "sound money". Pressure will be applied to keep the pound up in that fashion because of the improvement in oil prices. Now that is what is happening. The Government are killing the goose that laid the golden egg—the one that won them the election. The competitiveness that came from the fall in the pound consequent on the fall in oil prices is immediately being eroded. Indeed, it seems to be Government policy to erode it now.
Because our costs are increasing faster than those of our competitors, every day the Government try to keep the pound up or allow it to stay up means a worsening of the real exchange rate of the pound. It is now 10 per cent. worse than it was last October. That is the extent of the loss of competitiveness through the policy of keeping the pound up. In real terms, it is 30 per cent. worse than at the end of 1976, when the Labour Government promised the IMF that they would maintain the competitive position of British manufactures at home and abroad.
That is why we have had a succession of problems in the textile industry and in other basic industries. That is why the cries of alarm come not from the CBI, which in its desperate desire for knighthoods has been grovellingly sycophantic towards the Government, but from company reports that tell us about the problems that industry is facing. As the pound goes up, our competitiveness is eroded and the advantage that gave the Government their election victory disappears.
Disaster lies ahead with the American market. Nearly two thirds of the increase in exports—it has only been a 15 per cent. increase in manufactured goods since 1979—has gone to the American market. How can we maintain that, with the dollar coming down and the pound going up? The Government should address themselves to that problem.
While the Government are trying to keep the pound up, the Bank of England does not want interest rates to come down. It accepts the need for the pound to come down, so why does it not want interest rates to come down? It is because we have already had a huge asset speculation and a huge inflation in asset prices—in houses, takeovers and companies. That helped the Government's election prospects, but the Bank of England understands that that asset inflation will he small beer compared with the kind of asset inflation that will ensue if interest rates come down. We are trapped between the Government and the Bank of England. Our frail canoe, the British economy, which the Chancellor has already greatly overloaded with the weight of his ideological prejudices, is now up an excremental creek, and the Chancellor has thrown away the paddle.
The Chancellor has put the economy in that state just when it is essential that we should begin the work of rebuilding and expanding if we are to face the horrendous crisis in the 1990s, when we will not have the oil revenues that have kept the Government afloat and allowed them to survive.
I propose two essential strategies to the Chancellor. First, he should not rely so massively on private credit creation but should use state credit creation, which is no more inflationary. In March alone, the real money supply, M3, increased by £6·8 billion — the cost of Labour's plans to bring down unemployment. If we allow that increase in the money supply and privately created credit, why should not the credit be created by the state and channelled by the state not into asset inflation, as the banks are channelling it, but into jobs, expansion and production—the things that make the economy go? We must use the state's power to create and control credit and channel that credit by differential deposit ratios so that it goes into important productive purposes and not into speculation. We need to create a differentiation between advances for speculative purposes by the banks and advances for investment by the banks.
My second piece of advice is that it is essential to go on with the process of expansion, which the fall in the pound created but which the Chancellor is now trying to stop, by getting the pound down even further. We need to do that massively, not just so that existing firms can make more profit but so that firms will be encouraged to expand into production and import substitution activities that we have pulled out of because the rise in the pound and the first years of this Government made them uncompetitive.
The Government have failed disastrously in their economic management. They won the election by the manipulation of the economy, by economic sleight of hand and by deliberate distortion of the economic truth. I hope that the Government will now attempt to live up to the myth that they have created. I hope that they will turn the myth of an expanding economy into a reality based on the expansion of manufacturing which provides the jobs, the surplus for growth and public spending and our ability to pay our way in the world as the oil runs out. That is their responsibility; it is not to fiddle with the fish knives on the Titanic as they are doing in this Finance Bill. If they do not accept that responsibility, we shall be doomed for the next four years to a half-cock economy, presided over by a 40 per cent. Government to lead us straight to the disaster of the 1990s.

Mr. Tim Smith: I have listened with interest to Opposition Members' varying observations on the economic reasons for the Government's success at the last election. The hon. Member for Great Grimsby (Mr. Mitchell) told us that the reason was that they successfully deceived the British 'people. Some Opposition Members—notably the hon. Member for Oldham, Central and Royton (Mr. Lamond) immediately after the election—have been a good deal more realistic.
Those hon. Members have recognised that the Government have had considerable success in their management of the economy over the past eight years. Living standards are higher than they have ever been, output is higher and investment is increasing. The state of our balance of payments, so far from being in substantial deficit as many hon. Members, including the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), forecast before the election—although the hon. Member for Great Grimsby did not, of course—is far more encouraging than even the Treasury anticipated.
As always, I listened with interest to the hon. Member for Great Grimsby, hoping for enlightenment but, at the end of his speech, I did not feel that I had learnt a great deal, or, indeed, that the Labour party had learnt a great deal, from the election result. He seems still to want the Government to intervene in investment and direct people where to place their investments. Anyone in industry or commerce will tell him that there is no shortage of funds for attractive investment projects. Indeed, investment is increasing.
I referred earlier to the latest Department of Trade and Industry survey of investment intentions, which shows an 8 per cent. increase in investment in 1987. Total investment has risen year in, year out for the past six years, and I see no reason to suppose that that will change. Of course, it would have had to change had there been a Labour victory; investment intentions would have been very


different. However, with another four years of economic stability ahead of us, we can look forward to a period of increasing investment and prosperity.
When the hon. Gentleman talked about awful policies, well presented, I thought that he was summarising the Labour party's election campaign, in which the substance was greatly deficient while most people recognise that the presentation was competently run. Perhaps that is why the hon. Member for Dagenham (Mr. Gould) has done so well in the shadow Cabinet elections, on which I congratulate him.
I welcome the Bill. It has been belittled by Opposition Members, who have described it as a rump of a Bill. Of course, it contains the remaining provisions of the Budget, but it also includes two important provisions which, taken together with all the Government's measures over the past eight years, go a long way to dealing with some of the supply side problems in our economy.
I very much hope that the proposals for profit-related pay will have the results that the Treasury desires. They are imaginative and innovative and I am encouraged to hear how many employers have already responded to them. It was right to increase the attraction of the scheme by increasing the proportion of pay which will be subject to a tax allowance. The proposals will bring together the two sides of industry. Employees and managers will have a common interest in the profitability of their company. I wish the scheme well when it gets under way next year.
Equally, the tax proposals for personal pensions are attractive. They will assist job mobility, and it is good news that money purchase pension schemes are coming back into fashion once again. For years, inflation was so high that they offered no attraction, and it was occupational pension schemes that people found attractive. Now people will have the choice, and they will have the benefit of an attractive tax regime. The important point is that they will be able to take their pensions with them when they change their jobs.
On those grounds alone, the Bill is welcome. I am glad, too, that my right hon. Friend the Chancellor has made some changes in a couple of the proposals in the first Finance Bill. There was concern about capital gains tax on life assurance policies and the fact that funds accruing to policyholders were to be taxed at the rate of 35 per cent. Some people felt that the Government were departing from their stated objective of fiscal neutrality in the treatment of savings. I hope that my right hon. Friend the Financial Secretary to the Treasury agrees that that is still the Government's objective—a level playing field. The present proposal comes closer to that objective. Of course, it is impossible to achieve that precisely in practice. As long as the much loved lump sum in occupational schemes remains, there will be major anomalies. But that is the right objective and that provision comes much closer to achieving it.
I was glad to hear that my right hon. Friend the Chancellor had been able to reach some accommodation with Lloyd's. It is difficult for an outsider—I am not a member of Lloyd's—to form a judgment on the right taxation regime. Lloyd's cries foul every time a change is proposed and tells us that, as a result, the attractions of membership will be so diminished that Lloyd's will be under threat. But I am glad that every year there are more members of Lloyd's because, without individual

supporters and their capital, Lloyd's would be nowhere in the world insurance market. I am glad that we have a proposal that is acceptable to Lloyd's and that treats the reinsurance to close satisfactorily.
I have one complaint about the Bill. A substantial number of amendments to the Finance Act 1987, which passed through the House only a few weeks ago, have already been tabled. Had the normal procedure been followed, I suppose that a series of Government amendments on the oil taxation provisions would have been made to the original Bill in Committee and on Report and it would have been amended accordingly. We should be able to get provisions as complex as those on oil taxation right the first time, but there are four pages of amendments.
The Finance Act 1987 reduced the basic rate of income tax from 29 per cent. to 27 per cent. That legislation was debated at the appropriate time and since then the electorate has given its verdict. I believe that the reduction was popular with the average taxpayer and that he or she would like the basic rate to fall further. The hon. Member for Dagenham glossed over that when he talked at great length about Great Britain's economy in terms of Great Britain Ltd. and the attitude of prospective investors. Taking the hon. Gentleman's analogy further, every elector is an investor and every investor had an opportunity only a few weeks ago to pass a verdict on the performance of Great Britain Ltd. [Interruption.] I have no doubt that a substantial proportion of those who voted against the Labour party favoured cutting taxes.
The Government's commitment to a further reduction in the basic rate is welcome. It should be implemented when resources permit. I hope that Treasury Ministers will not miss the opportunity in next year's Budget to introduce major tax reform measures. There is a unique opportunity to do so. It is much easier to introduce those changes when resources are available to cushion the inevitable changes. Inevitably, with any kind of tax reform, there will be winners and losers. For a long time—perhaps too long—we have been debating the reform of personal taxation.
It is true that the response to last year's Green Paper was not as enthusiastic as the Treasury would have liked. My right hon. Friend the Financial Secretary referred to this during the Budget debate, saying that the Treasury had been unhappy with the quality of the response. I think that he said that the majority had favoured the Government's proposal for transferable allowances. The proposals by the Institute for Fiscal Studies, the Equal Opportunities Commission and so on, seem to favour the alternative of mandatory, independent taxation and increased child benefit. I hope that the Treasury will consider this matter with an open mind because it is important that we make progress. There is agreement that the present law, which states that the income of a married woman shall be deemed to be that of her husband, is out of date. We must remove sex discrimination from the system.

Mr. Butterfill: Does my hon. Friend agree that it is anomalous that the allowances for capital gains are not equal for man and wife but are aggregated to one single allowance?

Mr. Smith: We should introduce a comprehensive package which deals with the capital gains tax allowances


and investment income. We are moving to the stage when we need to consider treating each person as a separate unit for taxation purposes, regardless of whether that person is married. Many of my constituents are concerned that there is discrimination against marriage and feel that that is wrong. I hope that we shall deal with that aspect.
I realise that the issues are difficult and complex, but I think that next year's Budget will offer a unique opportunity to make progress and to do something about higher taxation rates. Partly because of a substantial reduction in the basic rate from 33 to 27 per cent., those rates are something of a mess, with rates of 27, 40, 45, 50, 55 and 60 per cent. I suggest that there is an opportunity to cut the top rate to a more sensible level in terms of international comparisons—perhaps to 50 per cent.—and at the same time considerably simplify the tax structure.
Yesterday I received an answer from my right hon. Friend the Financial Secretary. I had asked him the cost of taxing income above the standard rate at 35 per cent. for the first £10,000, at 45 per cent. for the next £10,000 and at 50 per cent. for the remainder. The answer was that it would cost £1·1 billion. On the face of it, that sounds like an enormous sum, but it needs to be put into perspective. The total yield from income tax this year is estimated to be £40 billion, so we are talking about just over 2·5 per cent. of the total yield to make a substantial reduction in the top rate. My right hon. Friend said:
This estimate makes no allowance for possible changes in the behaviour of taxpayers."—[Official Report, 7 July 1987; Vol. 119, c. 84.]
When we reduced the higher rates, the yield from the highest rate taxpayers rose because their behaviour changed. I believed that the net cost could be considerably lower than £1·1 billion.
I congratulate my hon. Friends the Members for Daventry (Mr. Boswell) and for Stamford and Spalding (Mr. Davies) on their excellent maiden speeches. I agree with my hon. Friend the Member for Stamford and Spalding that there is no shortage of money demand in the economy and that, if there are obstacles to growth, they are supply side obtacles. Of course, we must tackle the rigidities in the labour market and do more to improve labour mobility. My hon. Friend rightly referred to the urgent need to deregulate the Rent Acts. I am glad that that proposal was included in the Queen's Speech. Profit-related pay will go some way towards ironing out the differences and will perhaps introduce more flexibility in the labour market than changes in pay rates. In the long run, that will contribute to a further fall in unemployment.
I share the concern of my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) about regional disparities in unemployment which, he said are as important as the absolute level of unemployment. I hope that the Treasury will carefully consider his observations—first, that most of the Government's emphasis appears to have been focused on the inner cities, when clearly it is a wider regional problem, and, secondly, that there should be tax incentives to encourage employment in the regions.
The question is, how can we persuade an employer who wants to expand to go to the north? There is no shortage of employment opportunities in my constituency. Fortunately, we have a low rate of unemployment, but there is a substantial shortage of skills. Our area is prosperous, but what can we do to persuade an employer in my constituency who wants to expand that it is worth

while opening a new factory in south Wales, the north of England or Scotland? We must introduce more incentives to make employers who want to expand move to the regions.
The Government already have several policies that can and will help in that respect. First, the uniform business rate will be a substantial incentive because it will result in a substantial reduction in rates in the inner cities. Enterprise zones have a similar effect as, to some extent, will the urban development corporations. Therefore, there will be attractions for private investment to move into those areas once the infrastructure has been improved. Indeed, our entire regional policy is designed to achieve the same objective.
I support tough planning policies in my constituency, not only because my constituents want me to do so but because we could allow every mile on the M25 to be covered with factories and warehouses but that would not be in the national interest. A tough planning policy also encourages prospective employers to move further north.
I hope that the Treasury will look with an open mind at the cost-effectiveness of these proposals, whether they involve more public spending or new tax breaks. When one considers the proposal put forward by my right and learned Friend the Member for Richmond, Yorks (Mr. Brittan), one realises that, like any new tax concession, there will be a windfall bonus to existing employers and employees. However, it should not be dismissed for that reason and instead should be given serious consideration.
My constituents are generally prosperous. They work hard and as a result enjoy a good standard of living. I am convinced that they want the same opportunities for people in other regions. Therefore, I support the Government's inner-city initiative, in which I hope that the Treasury will participate enthusiastically.

Mr. Keith Bradley: I thank you, Mr. Deputy Speaker, for calling me to make my maiden speech on the Finance Bill, because the Bill clearly continues to identify the Government's social, economic and financial policies. Those policies were overwhelmingly rejected at the general election by the people of Withington.
I should like to start by paying tribute to my predecessor in Withington, Fred Silvester, who represented the constituency for 13 years. Although we had obvious political differences, he served well those constituents who sought his advice and was always courteous to me when I appeared with him on a public platform.
The night of 11 June was historic for Manchester. I am grateful for the fact that I can record that historic event so soon in this Parliament. It was historic for two main reasons. First, I am proud to have been elected as the first Labour Member of Parliament for Withington, turning a Tory majority of nearly 3,000 into a Labour majority of 3,500. Secondly, I am pleased to report that Manchester is now represented only by Labour Members, some of whom are here tonight. Manchester is now a bastion of Socialism and radicalism. The great city has always been famous for that, but it is now exemplified by its representation in this House. Many people contributed to that success in Withington on 11 June and I should like to


take this opportunity to thank them all for their help in the election, and to thank especially my voluntary agent, Mr. Tom Grimshaw, for his support.
Manchester, Withington returned a Labour Member of Parliament because the people of Withington firmly rejected the social, economic and financial policies followed by the Tory Government during the past eight years and the policies that were put forward in their manifesto. Those policies divide the country between north and south, and rich and poor. The policies that are now put forward are geared to make the rich richer and to grind the poor into greater despair. The people of Withington voted instead for the policies that were clearly presented by the Labour party. Those policies were based on need and not greed, and were designed to give hope to our elderly people, our families, and above all our unemployed people.
I shall discuss those policies briefly, because the policies on which the people of Withington voted are a reflection of the economic policies which have been put forward in the Bill and which they rejected totally. My constituents want a properly funded National Health Service, which will be financed by an expension of public expenditure. They are appalled at headline after headline that identifies the crisis in our hospitals and in south Manchester. Such headlines identify the growing waiting lists and the number of wards that have been closed, the closure of our accident and emergency department at Withington hospital at weekends, and the threats to the cancer services at the Christie hospital. Only last week, newspaper headlines suggested that the famous Pat Seed centre at the Christie hospital was under threat because of a lack of resources. Only yesterday I discovered that the waiting list for essential laser cancer treatment at Withington hospital is four months. The people of Withington voted for proper health care when it is needed, and which is free at the point at which it is needed.
The people of Withington voted also for a properly funded comprehensive education service that is available for everyone at the point at which they want it. They did not vote for an education service that will clearly be based on selection and on the ability of parents to pay for essential books, equipment, music, sport or even school trips.
My constituents voted for an expansion of public investment in our housing in Withington. They want proper central Government funding to ensure that our council houses can be repaired and modernised, and our private housing renovated. The right to a decent home is a cornerstone of civilised society. The hundreds of people in Manchester who are homeless cry out for that right.
The people of Withington voted also for a decent level of pensions for our elderly people. Those people want to live in dignity and have a happy and healthy retirement. Many elderly people in my constituency cannot afford to clothe themselves or to buy essential food. Worst of all, they cannot afford to heat their homes during the winter months. They are fearful of the winter bills and are appalled at the miserly contribution that the Government have made to support them during the winter.
Above all, the 7,000 unemployed people in Withington voted against Tory policies that gave them no hope that they would ever get a job. They voted for a Labour party that is committed to real and skilled jobs that will give

them hope for the future. They voted for the jobs that could be provided quickly in the Health Service in south Manchester, in our local authorities in Manchester and in the construction industry so that houses can be renovated to provide those decent homes for which, as I have already said, people are crying out. Instead, we are confronted with Mickey Mouse employment schemes, non-skilled labour and just another method of reducing the unemployment figures. However, even on the Government's figures, almost 7,000 people in Withington are waiting to receive a job.
The people of Withington voted against the tax cuts that are embodied in the Bill. They voted for an expansion of public services, provided by the local authority, to meet the needs of local people. They voted for the policies that would provide those services for our elderly people, families and children, for whom we should care. In Manchester the number of people living in poverty has risen dramatically since 1979. Nearly 50 per cent. of Manchester's population are now either dependent on supplementary benefit or have to live on wages that are below supplementary benefit levels. In other words, nearly half the people of Manchester are on or below the poverty line that has been officially set by the Government. Those people rely on the services provided by Manchester city council, but, since 1979, £1 million has been stolen from Manchester every week in the form of rate support grant or subsidy — money that would have been used to alleviate the grinding poverty in our city and to provide essential jobs such as home helps to care for our elderly and nursery teachers to look after our children.
As soon as I was elected on 11 June, I wrote to the Prime Minister suggesting that she take notice of the result in Withington and recognise the needs of the Withington people when whe was compiling the Queen's Speech. That approach was ignored, but I have a mandate to fight against all the legislation that will be introduced by the Government. I have a mandate from the people of Withington, because they did not vote for the Government's legislation. The people of Manchester did not vote for it, and eventually the people of this country will not vote for it.

Mr. John Butterfill: Those of us who served on the Committee that considered the Finance Bill before the general election are familiar with much of this Bill. We very much welcome the Government's efforts to introduce profit-related pay, because we believe that it will do much to provide incentives for workers in British industry. There is no doubt that the most successful companies in the British economy are those which, by and large, encourage their employees to participate in their profits.

Mr. Robert Litherland: It is the normal courtesy of the House to refer to an hon. Member who has just made a maiden speech. I hope that the hon. Gentleman will observe that tradition — or is this an example of Tory ignorance?

Mr. Butterfill: I was going to come to that during my speech, and I am grateful to the hon. Gentleman for reminding me of it. I have already congratulated hon. Members on their maiden speeches several times this Session, and I shall now do the same for the hon. Member for Manchester, Withington (Mr. Bradley).
The hon. Gentleman made a most articulate speech which promises a great future for him in the House. There is no doubt of his compassion and the intense feelings that he has for his constituents. We all understand the problems in the city of Manchester and, therefore, the intensity of the hon. Gentleman's feelings, although we may disagree with him about how those problems can be solved. I am sure that he will serve his constituents well, and we look forward to more contributions from him in the House.
It is a great tribute to the Government that, with personal pensions schemes, they are introducing a measure which will lead to mobility of labour. The ability to move from one job to another is becoming increasingly important at a time when people are having several different careers—different in terms of what they do and in terms of where they work. Several hon. Members have mentioned the difficulty of moving from the north to the south of England. There is no doubt that those difficulties are severe, but they are not entirely attributable to some of the reasons that were given. One of the principal difficulties is house prices. That is probably the major obstacle to mobility of labour.
But for those who are in work in the north the problem is not so much that they cannot afford to buy a house in the south, but that they cannot afford to accept the reduction in their standard of living that that would involve. There is not an enormous difference between rates of pay in the north and those in the south, although there is a London weighting allowance for those who live in London, and a handful of people who earn telephone numbers in the City. The great difference is in surplus expendable income. The profit figures for companies that sell consumer durable goods show that they sell considerably more in the north than they do in the south. That reflects the difference in surplus expendable income, and it goes some way to explaining why people are reluctant to move to the south of England. That is not necessarily a bad thing, because it may encourage employers to establish themselves in the north.
I was especially pleased to see clause 75. Many insurance companies have established themselves as major employers in my constituency and they have been valuable in creating an alternative economic base for a constituency which, historically, has been established on tourism. That has caused some problems because it is a seasonal industry, so we are grateful to have an alternative economic base for the town. To name but a few, Abbey Life, Ambassador Life, Gresham Life, National Mutual of Australasia, the Frizzell Group and Mutual International of Omaha have moved to Bournemouth and Poole and will be grateful for the changes that have been made to clause 75. I have always thought that it was anomalous that we should tax policyholders at the same rate as would be attributable to shareholders. That would not have been equitable, especially when we were taxing capital gains in a way that would have been retrospective in its effect on policyholders. I am grateful to my right hon. and hon. Friends for heeding the representations made by many of us in that regard.
I am also grateful for the changes that have been made in clause 70 in relation to Lloyd's. Lloyd's, which is an important earner of foreign currency and which forms an important part of the financial services sector of which the country is justifiably proud, should not be damaged at a time when it is under increasing pressure from foreign

competition, notably in the United States, Japan and the far east. Although I have no personal interest in Lloyd's, I believe that we should maintain the great engines of commerce which produce so much foreign exchange earnings for the country. I am grateful that the Government have recognised the problems of the previous clause. I gather that they will introduce more amendments. We look forward to them and we hope that they will meet all the concerns of those who are involved in that great industry.
May I deal now with a more parochial problem? My hon. Friend the Minister will be aware of my concern at the taxation of the self-catering holiday industry. It is growing rapidly in the United Kingdom because it provides low-cost holidays for families which might otherwise be unable to afford a holiday. It is extremely popular with lower-paid workers, and it is provided to a great extent in my constituency. Indeed, the chairman of the British Self Catering Federation resides in my constituency.
The federation has been worried that, following a court case in 1983, the basis on which the providers of self-catering accommodation were taxed—under case 1 of schedule D—was overturned, and the Inland Revenue decided that they should be taxed under case 6 of schedule D, which would have had disastrous consequences for the industry.
I am pleased to say that, following representations made by other hon. Members and myself concerned with tourism, the Government agreed to bring in amending legislation in the Finance Act 1984. Indeed, in section 50 of that Act the Government went a long way to redressing the problem that had been created by the court case. However, that amending legislation did not return the position to the one that had been understood by everyone prior to the case that was won by the Inland Revenue.
Section 50 created a special section of case 6 of schedule D. That change posed certain difficulties for the taxpayers. However, the greatest problems concerned the rules that governed acceptance to that special section of case 6 of schedule D, in particular subsection (3) of section 50.
The present rules, which provide that the accommodation must be available for letting for a certain number of days, that it must be actually let for a certain number of days in the year and that it must not be let for any purpose other than for holiday letting purposes for a certain number of days in the year are immensely complicated. This has certainly caused problems for the self-catering industry. To illustrate that, I shall read a brief extract of a letter that I received from the chairman of the British Self Catering Federation:
Because of the variations in locations of our members, opinions of the existing clause were diverse. For example, areas of the country that attract foreign visitors, such as Oxford, often let holiday flats for six weeks or even more! Resorts such as those in Cornwall can suffer a contracted season, particularly if the weather is poor. In Bournemouth, there is little chance of attracting many holiday-makers until the end of May, and bookings in June can be sparse.
That illustrates that there is a diversity of experience within the industry in different parts of the country that the present clause fails to meet. Therefore, I hope that we shall move towards a situation in which the volume of income derived from an activity is the principal test as to whether that activity qualifies as either special case 6 or case 1 of schedule D. I must put my hon. Friend the


Minister on notice that, in Committee next week, I intend to move an amendment which I hope we can discuss and which will promote further discussion on this subject.
I should like to draw the Minister's attention to the problems of the elderly. In my constituency we have more than double the national average of elderly people, and that creates its own special problems for my constituency. One of the principal problems that I encounter is what I would call "the hidden poor". Many people save during their lifetime and retire to Bournemouth. They enjoy a period when they are relatively well off, but historically inflation eats into the value of their savings and the husband, who is receiving an occupational pension, may die. In that event, the widow is left alone, perhaps in a nice bungalow, but without the occupational pension of her husband. She must rely solely on the pension provided by the state. Inevitably that lady is someone who should be provided for by the Department of Health and Social Security through supplementary benefit, housing benefit and the other benefits that we make available to the elderly in those circumstances.
That lady's difficulties arise from the fact that she has had no experience of claiming from the DHSS. Although many people in my constituency are experienced in such matters, the sort of elderly person that I have described has never previously been in such financial circumstances. Very often, people in such circumstances wish to keep up appearances. They deny themsleves heat and food to maintain those appearances. Such people come to the attention of the social services and the public only when they become seriously ill or are taken into care.
I am extremely concerned about that problem and I am sure that the Minister shares my concern. The interesting thing about people in such circumstances is that they possess an valuable capital asset — their home. Many retired people are now turning to the partial realisation of this asset as a means of assisting them in their financial predicament. Most people partially realise it by mortgaging part of their home to obtain a loan. With that loan they buy an annuity which, because of their age, gives them an income that is considerably greater than the income available to others.
Of course, that process depends upon tax relief being available. I was pleased to learn that in 1974 the Labour Government agreed to provide tax relief for that purpose. I am glad that the present Government have maintained that tax relief. The difficulty is that the Finance Act 1974, which provided that tax relief, contained what I believe to be a minor technical defect. It did not allow, as do all other similar arrangements, for the interest accruing after the death of the annuitant also to be allowable for tax relief. I am sure that that was an error in the drafting of the legislation. I hope that the Minister will study this matter to see whether an amendment can be made. The cost of making such an amendment has been calculated and I believe that it would be in the region of only £270,000 a year. That does not seem to be a great deal of money to correct what appears to be a technical anomaly.
I remain concerned that many of my constituents, even when they consider schemes of this nature, derive such a small income from them that they are inadequate to meet their needs. Retired people find it extremely difficult to cope with major, necessary home repairs, illness and all the other emergencies that may arise in their lives. Therefore,

I hope that we can improve upon the present arrangements in a way that will incur no net cost to the Treasury, but will produce considerable benefits.
Therefore, in Committee, I propose to move amendments which will allow for the retired people to enter a scheme involving the roll-up of the interest rather than payment of the interest. Therefore, interest would be paid at the end of the period, after death—I accept that that would be a cost to a person's heirs—but it would give annuitants a considerably increased income during their lives.
For such a scheme to be effective the law must be changed to allow for the interest to be deductible for tax purposes even though it is rolled up. I am sure that the Treasury Ministers will think that such a scheme would cost the Treasury money, but I am happy to tell them that that is not the case. Indeed, according to calculations made by a leading firm of accountants, the Treasury would benefit in cash flow terms because the new people who would come into this scheme and take up the opportunity would provide additional numbers and thus the tax paid on the annuity would exceed the tax relief forgone.
Let us assume that 20,000 home owners a year took out such a new plan with an average loan of about £15,000 only with the interest being added to the loan. Thus a total qualifying loan of £300 million per annum and repayments of £15 million per annum for each year of lending would mean that, after 12 years, the tax relief granted would be £27 million in year 12. However, the annuity tax paid would be £34·5 million, thereby considerably exceeding the level of tax relief. Even in year one, when no tax relief would be granted but annuity tax would be paid amounting to £1·5 million, there would be an immediate cash flow gain to the Treasury. I therefore very much hope that the Minister will look favourably upon that proposal.
When I turned to Hansard of 20 June 1974, I was gratified to note that the plight of people in this predicament was ably supported by a number of the Minister's distinguished colleagues. In moving the annuity scheme at that time, my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) said:
My right hon. Friend pointed out that those who are covered by annuity policies are people who are not well off, who have been particularly hard hit by inflation. Inflation was once described as the process by which the working population robbed the elderly population. We are being driven more and more into accepting that people have to sell off their home in retirement, to move into a smaller house, to rent off pieces of their home, to take out annuity policies and policies of this type.
My hon. Friend concluded:
Mr. Lyons also pointed out that three-quarters of the policy holders were widows in their late seventies. It is a compelling case and while I am grateful for what the Financial Secretary has said about considering the whole area of annuity policies, my amendment, which is so limited, should be accepted here and now.
My right hon. Friend the Member for Norfolk, South (Mr. MacGregor) also contributed to that debate. He said:
I have many elderly constituents. I was fascinated by the figures, because I had not realised that there were so many over-75s. I also have elderly relatives in the same position, people who for years have seen their modest savings eroded, who have found it difficult to make ends meet, and also now feel themselves locked in."—[Official Report, Standing Committee A, 20 June 1974; c. 244–46.]
I therefore commend to the Minister the possibility of looking at this in some detail, perhaps in the hope of bringing forward legislation at some future date.
Another cost benefit could arise, because by enabling these people to remain financially independent we will indeed reduce the cost to the state of providing benefits from the DHSS, such as supplementary benefit and housing benefit. I hope that the Minister will look at that most seriously.
There are two other areas that I commend to my right hon. Friend. The first is the possibility of providing tax relief for pensioners who need to repair their homes and take out a loan for that purpose. It seems to me that that is reasonable, because it is so difficult for pensioners to repair their homes, and many have to turn to the DHSS for assistance in their later years. I hope that the Minister will look favourably on that, and also at the possibility of allowing a qualifying loan for the provision of medical care in the home.
Many elderly pensioners are forced by circumstances to leave their homes and to go into hospitals or nursing homes for the want of an ability to provide medical care. If a loan can be taken against the value of their homes to pay for the cost of those services being provided, there would be a net saving to the state. I hope that the Minister will embark upon an analysis of the relative costs and benefits to the state in agreeing to that proposal.

Mr. Jimmy Hood: As I rise to make my maiden speech, I am well aware of the traditions of this House that new Members are expected to be nice and uncontroversial, to say nice and pleasant things, to sit down and then to descend to the Tea Rooms or the Bars for a well-earned pat on the back from one's peers. I shall at all times, where possible, respect this place and its traditions, but honesty with oneself is a prerequisite to honour, and no hon. Member representing working class people can, after eight years of this Government, come to this place from a Scottish constituency such as Clydesdale, listen to the Gracious Speech, knowing the further misery that this Government intend to inflict on the working class people of my constituency, and not be controversial. However, I intend to temper my remarks where I can, and I hope that I shall not strain the tolerance of the House too much or for too long.
My first pleasant duty is to pay tribute to my predecessor, the right hon. Dame Judith Hart, who came to this place as Member for Lanark in 1959—the name of the constituency has now been changed to Clydesdale—and who served the constituency well for 28 years until her voluntary retirement. Judith is well known nationally and internationally, and made a tremendous contribution to working-class politics, both as a Minister in numerous posts in Labour Governments and as an excellent constituency Member of Parliament. She was an outstanding Minister for Overseas Development. That was one of her major contributions to politics. She was also a long-standing member of the Labour party's National Executive Committee and its chairperson in 1982. I am sure that all hon. Members on both sides of the House will join me in wishing Judith and her husband, Tony—who himself has made a major contribution to working class politics£all the best for the future.
Clydesdale is a beautiful place in a most beautiful nation — Scotland. The people are friendly, hardworking and compassionate. Clydesdale is one of the largest constituencies in the United Kingdom. Obviously, agriculture and rural affairs figure largely in my

constituency, as do industrial and health care concerns. There are 11 hospitals, including Carstairs state hospitall, and the Ravenscraig steelworks, while outside the boundaries of the constituency, provides considerable employment to my constituents as it does for the rest of central Scotland.
While it has no pits, Clydesdale has a deep-mining tradition. It was at Douglas colliery that I started my mining career 23 years ago as a coalface engineer. Sadly, the pit closure mania of the 1960s and early 1970s destroyed mining in Clydesdale, and caused me, in 1968, to uproot my wife and young son and to seek employment in the coal mines of the Nottinghamshire coalfields. I was one of the original industrial gipsies, and I now stand elected as Member of Parliament for Clydesdale, where I was born and bred. I liken this experience to the salmon coming back home from the sea to the fresh water.
Nye Bevan once said of Britain:
This island is almost made of coal and surrounded by fish. Only an organising genius could create a shortage of coal and fish.
The Prime Minister and her Government are such organising geniuses. She has given away our fish to the Icelanders and the Russians, and because of her obsessions, she is destroying the mining industry — betraying the country's most natural resource on the altar of nuclear power, which this nation does not need or want.
Unemployment in Clydesdale is more than 20 per cent., and with that demoralising and obscene statistic we have the evils of urban and rural deprivation. As well as deindustrialising Scotland and elsewhere, this Government have also destroyed our rural communities and public transport, closed rural schools and post offices and caused high unemployment in the farming industry with their gutless inconsistency towards agriculture. The Tory is a dying breed in Scotland. As we know, the Conservative Government won 10 of 72 seats. They are, indeed, a dying breed. Each time that the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) graces the Conservative Benches after his customary good lunch, with his tartan trousers and all, we should savour the moment, because, having heard the Gracious Speech which will, if implemented, further devastate Scotland, we can safely say that after the next election the Scottish Tory will be no more. The hon. and learned Member will be extinct.
The Government should not think that they can ride roughshod over the Scottish people, and if they attempt to privatise or close Ravenscraig the wrath of the Scottish nation will be such as to make the miners' strike of 1984–85 look like a picnic.
Any Government who care about unemployment can cut it. Today, we hear talk of redistributing the burden of tax from the rich to the poor. The truth is that the Government do not care about unemployment, or the misery that it causes. I regret to say that nothing in the Finance Bill would give comfort to the poor, the sick, the unemployed or the elderly. The cynical synopsis of the Bill shows that it will be the same poison in the same bottle, only more than before. It was James Connolly who said:
Any Government that does not seek to improve the quality of life for its poorest citizen is immoral.
This Conservative Government stand condemned by his immortal words, and will stand equally condemned by the nation for their immorality.
It is appropriate, in my maiden speech, to pay tribute to my fellow trade unionists and former workmates. I


record my sincere thanks to my union—the National Union of Mineworkers—for its support over the 23 years during which I was a miner. I pledge my full support to the victimised miners and their families who are still sacked by British Coal two and a half years after the miners' strike. I call on the Secretary of State for Energy to stop the victimisation at once and to instruct British Coal immediately to reinstate the victimised miners. I am sure that he, more than any other member of the Cabinet, will appreciate the evils of victimisation, having just returned to the Cabinet after four years—himself a victim of such treatment.
As one who stood by the gallant striking miners of Nottinghamshire I wish to pay tribute to Henry Richardson, our general secretary, and to Ray Chadburn, our president, who, along with the 5,000 NUM Nottinghamshire miners, are now fighting for free trade unionism in the Nottingham coalfield against a demagogic British Coal mangement. I call on British Coal and the Secretary of State for Energy to seek the reconciliation of the coal industry and to give proper recognition to the NUM in the Nottinghamshire coalfield.
I can assure all hon. Members that, as long as the free spirit of trade unionism exists, as long as the free spirit of resistance of working class people exists, this Government will never defeat the working people of this nation.

Mr. Martyn Jones: I do not know whether it is customary for maiden speakers to praise the previous speaker, but I do so. I think that he made an excellent speech. I know, however, that it is customary to praise the previous Member of Parliament for the constituency that one represents—Clwyd, South-West in my case—a task that could be difficult in a seat gained by Labour from the Conservatives. However, I find it surprisingly easy because, despite being of the wrong party, my predecessor seemed a pleasant, quiet person, who fought a gentlemanly election campaign.
My predecessor had the problem of not being of the area, or even being resident in the area. However, he represented the constituency remarkably well on at least three occasions, when he voted against the Government in the interests of his constituents. He voted against the imposition of milk quotas, against cutting the standard rate of tax and against the further use of nuclear power during the Sizewell B debate. That is a worthy tradition that I hope to continue and build upon, especially in view of the fact that the Bill, in common with most of the Government's proposed legislation, will hold no benefits for the majority of the residents of Clwyd, South-West.
As a county councillor in that county for six years, I well know the problems of the two areas of the constituency. The large rural part, which is made up of the largely agricultural vale of Clwyd, is likely to suffer from further reductions in local government spending on transport and rural education. It desperately needs reform of the common agricultural policy of the European Community to help the small, livestock farms of the area. Jobs will be lost in the market town of Denbigh with the proposed closure of the North Wales hospital there. Those jobs are unlikely to be replaced without substantial investment and, preferably, regional development status for the Vale of Clwyd.
The problems of the urban, southern fringe are those of an old, industrial, predominantly mining area that is starved of investment. Villages such as Rhos, Cefn-Mawr, Ruabon and Acre Fair are unlikely to receive the investment that they require, although they are suffering in similar ways to the inner cities that have been singled out for special treatment by the Government. The idea that the Government need not intervene in industry, and that laissez-faire capitalism will return jobs and investment will not wash in villages created at the beginning of the industrial revolution, which saw what free enterprise did for them in the 1920s and 1930s. I fear that Clwyd, South-West will be in for four more years—at least—of degeneration. I therefore ask the Government to reverse their destructive and backward policies before it is too late, for the sake of the regions in general, and for the residents of Clwyd, South-West in particular.

Mr. Bowen Wells: It is my pleasant duty to pay tribute to the two maiden speeches that we have just hard, which were made by the hon. Members for Clydesdale (Mr. Hood) and for Clwyd, South-West (Mr. Jones). I am sure that the hon. Member for Clydesdale will appreciate that there are Conservative Members who also represent many members of the working class. It is one of the great glories of the Conservative party that we have members from every class, and that we are a broad party that listens.
I sincerely believe that we are following policies that will greatly benefit, and have benefited, members of what are called the working class. We are all, I believe, concerned with the greater benefit of all the people in our constituencies. The difference between us is that we choose and believe in different roads to that end. The speech by the hon. Member for Clydesdale, with its self-confidence and conviction, will be one on which he will look back proudly, and those who supported him at the election will do so, too. I envy his self-confidence and the way in which he put his arguments. He will be a great addition to the House of Commons.
I was especially glad of the kind words that the hon. Member for Clydesdale said about his predecessor, Dame Judith Hart, who made an enormous contribution to our nation's work in overseas development, and with whom I worked closely during her time in the House. I reiterate, confirm and support what the hon. Gentleman said about her contribution to the affairs of the House and, in particular, to overseas development. I therefore congratulate the hon. Gentleman on behalf of us all and welcome him to this place. I do so especially because our traditions in this country of Britain, of which Scotland is a major and important part, mean that it is necessary to come here and debate issues and settle our differences across the Floor of the House and not in any other way.
I also congratulate the hon. Member for Clwyd, South-West on an excellent speech from the Principality of Wales, with which I have some connections. My first name is Welsh and my relatives come from Llandilo and Carmarthen in southern Wales, but I also have connections with the hon. Gentleman's area of north Wales. The hon. Gentleman's speech, too, illustrated the concern of the House with the whole of Britain. He eloquently expressed his concern for his constituents on matters of vital concern to all of us which must not be forgotten in the debates of this Parliament. I believe that


the hon. Gentleman will make a major contribution to those debates. I welcomed, too, his reference to his predecessor, Mr. Robert Harvey, who made a great contribution to the House as well as to his constituency—also, strangely enough, on overseas development and foreign affairs. The hon. Gentleman was most kind in his tribute. I hope that he, too, will enjoy his stay in the House. I am sure that the House will benefit enormously from his contributions.
I wish briefly to bring a number of matters to the attention of my hon. Friend the Economic Secretary, whom I welcome to his new position as it is the first time that I have seen him on the Front Bench in his present capacity. We are fortunate, indeed, to have a person of his calibre and experience to take on that job in this Parliament. We are very lucky that he will be directing our affairs on the economic front. I congratulate him on his appointment and look forward to supporting him from the Back Benches.
I wish to draw my hon. Friend's attention to a subject which, to my deep regret, has been omitted from the Finance Bill. The omission is basically due to the general election having taken place in the middle of the usual Finance Bill procedure. Those of us wishing to add new clauses to the Bill have effectively been prevented from doing so, first because of the curtailment of debate on the Finance Bill before the election, and now by a curious procedure of which I was unaware. I learn something every day in this place and rejoice in so doing, but I had not realised that on Friday—not surreptitiously, but at a time when most of us were dealing with constituency matters—an extremely restrictive set of resolutions were passed without debate. These resolutions prevent us from raising general taxation issues, in so far as a resolution allowing us to do so was specifically omitted. I exclude my hon. Friend the Economic Secretary from any accusation of seeking to prevent debate on these matters, as I am sure that he did not realise that that would be the effect. Like my hon. Friend, we are all anxious to get away to our families and to deal with the Finance Bill quickly, and I know that that was the intention. Nevertheless, it means that serious matters now cannot be debated.
I wish to deal particularly with the subject of duty deferment, which is a matter of equity. Duty on liquor and other items held in bond is a consumer tax, paid by those who drink the liquor or buy the goods. Under the current arrangements, the Government collect the tax almost as soon as the goods leave bond. As a result of a promise made by the Conservative Opposition between 1974 and 1979, there is a deferment period of three weeks before the tax has to be paid.
My right hon. and learned Friend the Member for Surrey, East (Sir Geoffrey Howe), when he was shadow Chancellor, agreed that the system was inequitable because traders were obliged to pay the tax to the Inland Revenue before receiving it back from the consumer buying the liquor in the off-licence or supermarket. Anyone trading in this sector is thus seriously out of pocket, while the Treasury is grandly in pocket. On average, the consumer tax is paid to the Treasury eight weeks before it is collected from the consumer. The companies involved therefore have to borrow the money at the very high interest rates that have prevailed in this country for many years so as to finance the payment of the tax to the Treasury.
My hon. Friend the Economic Secretary may argue that that has always been so. Nevertheless, it is agreed that the situation is inequitable and I believe that there should be a compromise, with a longer deferment period. As the average period between the goods leaving bond and the tax being paid by the consumer is about 12 weeks, I suggest that the Government grant a duty deferment of some eight weeks, reducing the interest charges considerably for companies in this sector and saving them a considerable amount of money.
It may be argued that the liquor industry is doing very well and does not require that kind of treatment, but all other European countries make similar arrangements and British companies are therefore trading at a serious disadvantage compared with those producing brandy, wine and other liquors from the continent that people savour. Scotland, especially, depends heavily on the whisky trade. the companies involved are international companies trading worldwide and depend on being able to afford the advertising costs, and so on, to ensure that their brands are sold overseas. The way in which the tax is collected puts them at a serious disadvantage. As their activities provide a major source of income for the Government, through the repatriation of dividends and the sale of capital from the United States and elsewhere, this is a matter of real concern for some of our major companies in this country and worldwide.
My hon. Friend the Economic Secretary may argue that my proposal will cost the Treasury money, but that is not so. There will be a cost only in terms of cash flow. Unlike my hon. Friend, who has been in private business, the Treasury has great difficulty distinguishing between cash flow and the normal profit and loss balance sheet accounting to which the private sector is accustomed. It will mean deferring the income for one year only. Given the buoyancy of the Government's taxation and revenue position, I believe that this is the year when we should take the opportunity to put the injustice right. We should thus boost and support a domestic and worldwide industry based in this country which needs to win a greater share of markets. In Japan, for example, there is severe discrimination against our companies due to internal taxation policy, and more money will be needed to overcome the problem. I know that my hon. Friend the Economic Secretary to the Treasury and my right hon. Friend the Secretary of State for Trade and Industry and I are keen that we should redress the inequities in our trading account with Japan. My hon. Friend can help companies and so ensure that our trading is fairer with Japan.
For those reasons, I believe that my hon. Friend would be wise to ask his officials and ministerial colleagues to consider whether this is the opportunity to correct this serious injustice. He does not have to correct it through legislation. His predecessor, who has now gone to another place, introduced orders to correct inequities when the right opportunities arose.
I am glad that the Inland Revenue has been persuaded by my hon. Friend the Economic Secretary to negotiate on a sensible basis rather than the aggressive and, I fear, unfortunate manner it adopted with regard to Lloyd's on the issue of reinsurance to close. I am glad that my hon. Friend knocked heads together in the Inland Revenue and made members of Lloyd's adopt a less defensive and more pleasant and co-operative attitude to the Inland Revenue and so accept a clause in the Bill which I hope will resolve


the serious difficulties that Lloyd's was causing to the Treasury and my right hon. and hon. Friends on the Front Bench.
The problem with Lloyd's involved a serious inequity, and that could have undermined the whole basis of Lloyd's insurance. It would mean serious losses to this country. I look forward to hearing the explanations that my hon. Friend the Economic Secretary will provide to the House to show everyone how the clause will work equitably with Lloyd's insurance and the legitimate interests of our tax system.
I understand that the Treasury has lost interest in the Government's very important Green Paper on personal taxation. The Chancellor of the Exchequer has become less of an enthusiastic reformer of personal taxation. It would be a tragedy if we did not take the opportunity provided by the general election to make serious changes for the better and so achieve more equitable treatment between men and women. We could take large numbers of people on low pay out of taxation and also align the personal taxation system with the social security system and remove the disincentive to go to work that exists at the moment.
I urge my hon. Friend the Economic Secretary, with his youth, enthusiasm, integrity, desire and ambition to change this country for the better, to take hold of that Green Paper and produce a White Paper which he can bring forward to legislation during this Session. We could then begin to tackle the serious need to reform personal taxation. If my hon. Friend did that, he would go down in history as one of the most important holders of his office. He would provide incentives for people to go to work and believe that their taxation was fair. They would then pay it gladly. Indeed, he would turn the army of accountants and tax experts from the job of tax evasion to the more beneficial task of creating new companies which would go out and beat world competition. Among those people are some of the cleverest and most able in the country. If my hon. Friend can achieve that, he will have done an enormous service to this country and our people.
Finally, I hope that this Finance Bill is just a beginning, even though it has omissions, some of which I have drawn to the attention of the House. I believe that with the present Treasury team the Government can bring forward a taxation and financial system that will make Britain one of the toughest competitors in the world, bring all our people back into gainful work, increase their standards of living and provide incentives and hope for all.

Dr. John Reid: I am grateful for the opportunity to address the House this evening. It must be easier to address the House later in the evening when the Chamber is less populated than normal. However, I cannot help remarking as I look at the empty Conservative Benches that I am reminded of a mass rally of the Scottish Tory party.
I thank you for allowing me to speak this evening, Mr. Deputy Speaker. I have some familiarity with the Chamber because I had the honour and privilege to work for some years for my right hon. Friend the Member for Islwyn (Mr. Kinnock), the Leader of the Opposition and the next Prime Minister. Despite that familiarity, like any other new Member, I rise with some trepidation to speak this evening. Like any new Member, I am well aware of

the weight of tradition that surrounds us and I am aware of the centuries of history in which the Chamber is steeped. That knowledge can have an intimidating and daunting effect. Many years ago that was recognised by a former Member from the Celtic fringe who sat on the Labour Benches. He wrote that it was as if the dust of ages lay in the corridors of Westminster, muffling the footsteps of the working men who entered within.
The Palace of Westminster"—
I am quoting from Nye Bevan, to whom my hon. Friend the Member for Clydesdale (Mr. Hood) referred—
is dominated by the most powerful of all religions—ancestor worship.
I am sure that many new Members must share that feeling as they enter the Palace of Westminster and notice the frescoes, paintings and sculptures of the great and powerful statesmen of previous centuries.
I am fortified by the recognition that those statesmen were not my ancestors. While the great legislators of previous centuries were posing for their portraits or sculptures, my ancestors were digging roads or howking coal. That recognition frees me from the bonds of deference when addressing the House.
The political history of my constituency is more recent, but no less powerful for that. Motherwell, North is scarcely five years old. It was formed after boundary changes in 1983 and its comparative youth belies the fact that its constituent parts, particularly Bothwell and North Lanark, have made a consistent and considerable contribution to this House and my party. That contribution was most recently made by my predecessor,Jimmy Hamilton. It is fitting that in my maiden speech I should pay tribute to the faithful service that he gave to this House and my constituency.
Jimmy Hamilton succeeded John Timmins as Member for Bothwell in 1964 and for 19 years provided a perfect example of a diligent and devoted constituency Member. His work was recognised within the House by his appointment to the Whips Office and by his appointment to the post of Vice-Chamberlain to Her Majesty's Household. I am sure that Jimmy Hamilton would be the first to recognise that he was but the last in a long series of outstanding representatives who came from Motherwell, North. The first of them was born just outside the village of Holytown of working-class parents a little more than 130 years ago. Born into poverty, delivered into the mine owners' hands at the age of seven, James Keir Hardie rose above the surroundings of deprivation and impoverishment to become the most famous son of my constituency and the founding father of the Labour party.
Amidst the economic catastrophe of the 1920s in Motherwell, North, the young Jennie Lee was first returned as Member for Lanarkshire, North at the age of 25. Her successors were no less illustrious. Between 1945 and 1983, Lanarkshire, North was served by two Members of national status and Cabinet rank, the right hon. Margaret Herbison, whom I am pleased to say retains her health, vitality and political commitment in her 82nd year, and latterly my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). When I recite those names, I realise that if I ever manage to achieve anything in the House it will be only because I stand on the shoulders of giants. I cannot hope to emulate the achievement of those predecessors, but I shall try to imitate them, knowing that imitation is the sincerest form of flattery.
In Motherwell, North, we have pride in our past. What we now seek is a Government and a Government policy that will give us faith in our future. At present, I regret to say that that faith is sadly lacking—not because our people lack the skills or the will to work, and not because they lack the energy, the talent or the commitment, but because thousands of them lack the opportunity. They lack the chance of self-advancement. They do not seek sympathy, sentimentality or charity all that they want is a chance. Over the past decade, however, that chance has been denied to them.
Like my hon. Friend the Member for Clydesdale I am well aware of the convention that maiden speeches should be non-controversial. It places me in an impossible position. If I avoid controversy in the House by omitting to describe the stark reality of Motherwell, North, I shall only cause controversy and consternation among the constituents who sent me here to represent them. Over the past 10 years, it is they who have suffered. Just as, over the past few hours in this House, we have become used to quite a few maidens, so too, over the past few years, my constituents have become used to "made-ins". They are usually of the oriental variety: "Made in Japan", "Made in Korea" and "Made in Taiwan". What we want is a future secure in the knowledge that in a decade's time, we can still look proudly on a host of manufactured products bearing the emblems "Made in Motherwell", "Made in Uddingston", "Made in Bellshill" and "Made in Scotland".
Unfortunately, that prospect looks less hopeful with evey passing month. From one extreme to the other in my constituency, the signs of economic decay proliferate. At one end, in Tannochside, the vast Caterpillar plant still stands under the sentence of industrial death. We are not dealing with an old, decaying industry with bad industrial relations, with an antiquated work force or with a loss-making factory. We are dealing with a factory and a work force that meets every economic and commercial criterion set down by the Prime Minister for survival in her brave new Britain. We are speaking of a productive, technologically equipped, profitable factory with a flexible and skilled work force and an excellent industrial relations history. Yet it faces the axe. What a waste of the millions of pounds of taxpayers' money which has already been invested, and which must all be thrown away on the whim of an anonymous management that looks upon Scotland as a faraway country about which it knows little and cares even less.
I listened with some amazement to the Secretary of State for Scotland when he proudly proclaimed in the debate on the Loyal Address that American investors were falling over themselves to come and produce in Scotland. I ask the same question that my constituents are asking. If United States companies are desperate to produce in Scotland and the Government are desperate for them to do so, why has he been such a dismal failure in saving a single job in the Caterpillar factory at Tannochside?
Just a few miles up the road is the Clydesdale tube works at Mossend, whose work force lives under an apparently endless stream of rumour and counter-rumour about lay-offs, sell-offs or proposed mergers. Surely, if the Secretary of State for Scotland could make room in that speech for his contribution boasting of the increased prosperity and profitability of the Scottish steel industry, he could also have taken a little time to end the insecurity

of the Clydesdale work force by pledging some of those increased profits towards investment in the Clydesdale plant.
While we are on the subject of steel, which was referred to earlier by my hon. Friend the Member for Clydesdale. let me say that there has been a further crime of omission in the statements and pronouncements of the Government. Just outside the boundaries of Motherwell, North, in the constituency of my hon. Friend the Member for Motherwell, South (Dr. Bray), lies the steel plant that has become for many in Scotland the symbol of industrial Scotland. If the death warrant has been signed, sealed and delivered for the Caterpillar factory, the Ravenscraig steel plant has been the doubtful beneficiary of a stay of execution prised from a reluctant Government. The workers, who include many of my constituents, have fulfilled everything that has ever been asked of them. They have produced high-quality goods, on time, to customer specification and with record productivity—again, the very definition held up by the Prime Minister as an example to British industry. They have never made a pledge that has not been kept, or a claim that has not been backed by hard fact and hard argument. They deserve a better future than one of insecurity and under-investment.
Lest there be any thought in any quarter that the Ravenscraig plant can be closed by stealth, investment starvation or salami tactics, let me say as firmly, plainly and simply as I can that the people of Motherwell—the people of Scotland—recognise that a country without a steel industry is like a car without an engine: it is going nowhere. If Ravenscraig is threatened, we will fight as never before and we will be right as never before.
I could spend far more time than is available to me outlining the precarious nature of much of the manufacturing base in my constituency. From the more traditional concrete manufacturers at Newmains to the Honeywell factory at Newhouse which stands at the frontiers of technology, all have been blighted by a stagnant economy and a chronic absence of demand—not an absence of need, because there is real need in my constituency. It is a daily reality for those who have to wait hours for public transport, months for a council house and years for repairs. It is there for pensioners who are insecure, families in debt and young unemployed people in despair.
It is sometimes said that the Prime Minister does not care about all this. I should make it plain that I do not think that all criticisms of the Prime Minister are fair. I have often heard the cliche that the Prime Minister could be compared in her economic impact with the Luftwaffe. That is a grossly unfair comparison—grossly unfair to the Luftwaffe, which never managed to get beyond London. But this Prime Minister has managed to reach the parts that other bombers could not reach and has destroyed whole tracts of the country.
When it is said that the Prime Minister does not care, I find that difficult to believe. I cannot conceive of anyone, even the Prime Minister, being so callously indifferent to the plight of those people. I prefer to think that the Prime Minister just does not understand. She just does not know, because she does not live with the situation day in, day out. So today I take the opportunity of extending an invitation to the right hon. Lady to come and see for herself. Until and unless she comes to my constituency, the suspicion will remain that her ignorance is a wilful ignorance, and the sad and regrettable fact will remain that we are a country


governed by a Prime Minister who is more respected on Capitol Hill than in Bellshill, a Prime Minister who is more welcome in Chicago than in Shotts and more at home in Moscow than Glasgow. As long as that persists, it not only reflects badly on the Prime Minister but undermines the legitimacy of good government in Britain and threatens to erode the very basis of the unity of the United Kingdom. That is bad news for my constituents, bad news for the Government and very bad news for the standing of this House.
I shall end by quoting the favourite and famous son of my constituency, Keir Hardie. One hundred years ago, James Keir Hardie wrote that great countries are just like individuals. He said that at certain stages of their life they reach a crossroads and woe betide them if they choose the wrong path. I believe that in Scotland and in Britain we have come to such a crossroads. I believe that the Government are travelling on the wrong road. For the sake of my constituents and my country, the sooner they recognise that they are travelling down the road towards disaster for the United Kingdom, the better it will be for all of us.

Mr. Philip Oppenheim: It is my pleasant duty to congratulate the hon. Member for Motherwell, North (Dr. Reid). His speech was both eloquent and occasionally witty. I am sure he is far too modest in saying that he will not go as far as many of his predecessors. I am sure that he will. However, it is unfortunate that he concentrated on the fact that too many of the products available in his constituency are made in Taiwan, Korea and Japan, because only two years ago the Labour party headquarters at Walworth road invested a large sum of money in a Japanese Canon photocopier system when it could have just as easily bought a Rank Xerox system with a large British content.
We hear constantly from Labour Members a litany of what they consider to be the decline of British industry. Their historical perspective tells them that the decline of British manufacturing began with the accession of Mrs. Thatcher to power in 1979. Unfortunately, such a simple view of history is far from true. Many economic historians consider that our manufacturing industry began to decline relative to our main competitors in the middle of the 19th century. That decline was camouflaged for many years by two things. Before the last war we had the protected and safe market of the empire in which to sell. It was often protected from the competition of our main competitors and that buoyed up our industry artificially for many years in the 1920s and 1930s. After the war many of our main competitors were flat on their backs and for 10 or 15 years we were able to sell our goods into markets without meeting any effective competition. Unfortunately, that lulled us into a false sense of security.
We must ask ourselves why, for many years, British industry has not done as well as it has in many of our main competitor countries. Surely one of the major reasons must be that since the middle of the previous century the British education system has lagged sadly behind the educational provision in countries such as Germany, the United States of America, Sweden, Switzerland, Austria and even Japan. That sad tale of missed opportunities and of lack of provision of suitable education which would

produce the sort of people who could manage world class industries, has been compounded by the mistakes of many Governments, not just Labour Governments, since the war.
Between the last war and 1979 the history of Government spending in Britain was a history of Governments spending money that the country did not have. While we were spending that money that we had not yet earned, our European competitors and the Japanese were rebuilding their industries in order to create the wealth to spend on those benefits.
That was compounded by the anti-business attitude which was common in the Labour party in the 1960s and 1970s. The Labour party made an enemy of enterprise, pilloried profit, blasted business men and sneered at success. Then it feigns surprise at the fact that our industry has not always done as well as that of our competitors. High tax rates destroyed enterprise. Unbalanced trade union legislation destroyed managers' ability to manage. Successful industries were forced to subsidise loss-making industries. Nationalised industries were run, not for customers and shareholders but for civil servants, politicians and the vested interests of the trades union bosses.
Ludicrous, uneconomic decisions were made, such as the decision to set up NEXOS by the previous Labour Government when Labour politicians and civil servants decided that Britain must have a great information technology industry to rival IBM. By the time that sad fiasco collapsed, £40 million of taxpayers' money had been wasted. All NEXOS had done was succeed in importing and branding with the NEXOS name thousands of Japanese facsimile machines. When it finally went bust, it sold for £1 1,000 facsimile machines, which the Government-controlled body had bought for £1 million.
Bearing in mind that sad tale of industrial decline and mismanagement, it perhaps is no surprise that our share of world trade has fallen steadily since the last war. Between 1974 and 1979 manufacturing ouput in this country fell. The ratio of manufactured imports to exports rose threefold under the Labour Government. That must give the lie to the myth propagated by Labour Members that our manufacturing industry has been in decline only since 1979. The truth is that, since 1979, lower taxation, more encouragement for enterprise, more balanced Government spending, the end of much of the worst loss-making in the nationalised industries and the sale of many companies in the nationalised sector, which have done extremely well in the private sector, have helped to transform the British economy.
We still have problems. Of course our education system is still in desperate need of reform and improvement. However, no longer are Britain and British industry the laughing stock of the world. No longer are we sneered at by our foreign competitors. The basis for our industrial recovery is there and the decline has been successfully halted. That is shown by the fact that our manufacturing output has risen rapidly since the trough of the recession in 1981. It may be true that many of our old industries have shrunk terribly or disappeared altogether. However, many new industries are doing extremely well. That central fact seems to have passed by many Labour Members.
The British aerospace industry is the world's third largest manufacturer of aerospace products, after the United States of America and Russia. Our pharmaceutical industry has now overtaken the Swiss, the Germans and


the Americans to become the world's largest exporter of pharmaceutical products. Imperial Chemical Industries is now the world's largest paint manufacturer. Pilkington is now the world's largest glass manufacturer. The decline in textiles and clothing has largely been halted. Many parts of our electronics industry are competing very well in world markets.
In my own constituency, where 15,000 jobs in the mining industry were thrown away by Labour Governments in the 1960s, many of those old jobs have now been replaced by jobs in new manufacturing industries. But still the Labour party pillories and sneers at successful United Kingdom companies such as Hanson Trust and BTR which have saved many struggling smaller companies and preserved many jobs through successful management. Unfortunately, Opposition Members all too often still cling to the old interventionist dirigiste policies that have generally failed everywhere, no more so than in Britain in the 1960s and the 1970s. They should realise that politicians and civil servants are not the people who are best suited to making business decisions. Business men are.
Slowly but surely Britain is getting back on the right track. It is true that we still have much to do. After all, we have many years of decline to reverse. I believe that the Finance Bill is another step in the right direction.

Mr. Bruce Grocott: This is not quite a maiden speech, but I must say that it feels like one. In my case, it is eight years since my midlands constituency made what I thought was a depressing decision, but to come back after eight years and to represent The Wrekin is a thrill, a delight and an honour. The Wrekin has a great tradition as the birthplace of industry, so it is appropriate that I am called in the debate.
While listening to the speech of the hon. Member for Amber Valley (Mr. Oppenheim), it struck me how clearly that contrasted with the maiden speeches of my hon. Friends today. The Finance Bill is a debate about economics. Not once did the hon. Gentleman mention people. He talked about theories, I thought ropey theories, while my hon. Friends the Members for Cardiff, West (Mr. Morgan), for Manchester, Withington, (Mr. Bradley), for Clydesdale (Mr. Hood), for Clwyd, South-West (Mr. Jones) and for Motherwell, North (Mr. Reid), concentrated on people. For goodness' sake, let us make sure that economics is the servant of the needs of the people to fulfil their aspirations and their legitimate desires, and let us not make it the master, as it all too often sounds from the Government Benches.
I represent the traditional areas of Oakengates, Wellington, Dawley, Hadley, Madley and Donnington, mixed together into the new town of Telford. The Wrekin constituency has a quite remarkable record in 10 of the past 12 general elections since the war, in that it has returned to Parliament a candidate of the same party as the party that formed the Government. That seems to be an uncanny characteristic that it has. I am delighted to say that at this general election the people of The Wrekin seemed to have more sense than the people of the country at large. They will revert to type at the next general election, when I shall be doing all that is required to make sure that they return a Labour Member and that there is a Labour Government.
When one comes back after eight years, it is inevitably a time for some reflection. In the House eight years ago,

everyone knew that whichever party won the general election would have the overwhelming prospect of remaining in power for the larger part of the 1980s. There was nothing miraculous or surprising about that. When arrogance creeps in among Government Members, perhaps we need to remind them that it is only the tremendous life raft of North Sea oil that has enabled the Government to stay in power, when the electorate, had it been faced with the consequences of their disastrous economic policies, would have long since thrown them out.
It is rather depressing to find myself on the Opposition Benches rather than on the Government Benches. How different the world looked in 1979, particularly in the west midlands, and particularly also on the jobs front. These days in the west midlands it is almost impossible to get an apprenticeship. There is a two thirds collapse in apprenticeships in engineering, in a region which in the past has always been cushioned from the economic effects, even when the country has been in a period of recession.
What are the hopes and prospects for young people in my constituency now, after eight years of Conservative Government? I noted the malicious passage in the Gracious Speech about withdrawing benefit from young people who refuse to go on youth training schemes which they consider to be unsatisfactory, and when I read the Finance Bill I found that there were provisions on profit-related pay, capital gains tax and inheritance tax. Provisions of that sort are massively irrelevant to young people who are desperate for jobs and fulfilling occupations in my constituency.
I think sometimes that Tories speak in ignorance rather than with malice. When a young person in my constituency attends an interview with a view to taking up a youth training scheme, the personnel manager, or whoever is conducting the interview, barely needs to look at him before he says, "Yes, you are on. Next, please." All too often he knows that the person before him is another source of cheap labour for the future. He knows that there is no need to assess the merits of the applicant. The YTS provides a convenient way of filling a job at the cheapest cost to the employer. I wish only that the Bill contained more provisions relevant to the needs of young people.
Since 1979 unemployment in my constituency has increased by 7,000. That is an increase of about 900 for each of the eight years of Conservative Government, or an increase of three per day, including Christmas day, bank holidays and other statutory holidays. That is a huge indictment of the Government's performance over the years. At GKN Sankey, over 5,000 jobs have been lost since the Government came to power. That is not the end of it, because we know that during the year the Government will introduce policies that will he designed still further to reduce job opportunities.
It appears that the Government are determined to press ahead with privatisation, even in one of the most cherished sectors of employment in my constituency, the defence industry. The Government are determined to privatise services at COD Donnington. The privatisation of key services in eight areas of work will result in the loss of about 400 jobs. We know also about the plans for privatisation in local government and elsewhere. The Government persist with privatisation, especially in the defence industry, to reduce the number of jobs available or to reduce conditions of employment. Those are the only


conceivable reasons for proceeding with the policy. That is an indictment of the Government that bodes ill for the next few years.
To return to the House after a gap of eight years should be a moment of personal optimism and confidence, and in many respects it is. It is difficult to feel optimistic and confident, however, in the knowledge of the policies that we shall have to oppose during the next year, or perhaps even the next four years. I should be optimistic, because I represent a new town which, by definition, is a place of optimism. People go to new towns to build a new future, but there is nothing that I have read in the Bill, and nothing that I can expect to happen over the next few years, that leads me to envisage anything but an exercise in damage limitation in response to a Government who seem intent on damaging the midlands. The same has been said by many of my hon. Friends who represent constituencies in Scotland, Wales and elsewhere.
It is no exaggeration to say that in The Wrekin the Government are loathed. The people of The Wrekin expressed their view clearly at the general election and I was delighted with the decision that they took. I am confident that within the next four years the rest of the country will come to understand that there is great wisdom among the electorate of The Wrekin.

Mr. Tony Blair: It has been a pleasure to sit on the Opposition Front Bench for much of the debate and listen to some maiden speeches that all hon. Members will agree have been absolutely excellent. Two maiden speeches have been made by Conservative Members, and I pay tribute to them.
First, the hon. Member for Daventry (Mr. Boswell) spoke with great feeling about his constituency and with tremendous knowledge and insight about the common agricultural policy and its difficulties.
The hon. Member for Stamford and Spalding (Mr. Davies) also made a maiden speech. As he pointed out, he succeeded a much respected and liked former Member, Sir Kenneth Lewis. The hon. Gentleman was absolutely right in saying that Sir Kenneth always showed great independence of mind. I remember persuading Sir Kenneth to vote against the Government and support an Opposition amendment to the 1986 Finance Bill. I hope that the hon. Member for Stamford and Spalding will follow in his footsteps.
The hon. Gentleman also spoke without having to refer to notes, in more or less the same manner as my hon. Friend the Member for Cardiff, West (Mr. Morgan), who made an absolutely superb maiden speech that Opposition Members much enjoyed. It was witty and eloquent. It was filled with excellent advice to the Government on the proper place of manufacturing industry as the wealth-generating base of our economy and the importance of realising the threat to our service industries from overseas competition, as well as the threat to manufacturing industry.
We also heard a maiden speech from my hon. Friend the Member for Western Isles (Mr. Macdonald) who united the whole House when he spoke in Gaelic. That passage of his speech certainly made as much sense to me as some of the provisions of the Finance Bill. It was an interesting, good maiden speech. It gave us a fascinating

insight into a different type of economy, and the problems that he mentioned seemed to strike a chord with all hon. Members.
My hon. Friend the Member for Manchester, Withington (Mr. Bradley) spoke of the link between investment in public services and the meeting of community needs. As we listened to him, it was easy to see why he overturned a Conservative majority in the way that he did.
My hon. Friend the Member for Clydesdale (Mr. Hood) paid a tribute that was welcomed by both sides of the House to Dame Judith Hart for the work that she did over a long period in the House. He drew attention to the rejection of Government policy in Scotland. It was a passionate, good defence of the basic principles of trade unionism.
I also pay tribute to my hon. Friend the Member for Clywd, South-West (Mr. Jones), who gave an entirely accurate summary of Government policy and its effect in relation to his constituency. Again, from his maiden speech, it is easy to see why he overturned a Conservative majority and was elected.
There were two other maiden speeches. My hon. Friend the Member for Motherwell, North (Dr. Reid) made a speech which, to those of us who knew him in an earlier incarnation in the Leader of the Opposition's office, came as no surprise. It was a witty, brilliant speech, and I pay great tribute to him. He extended to the Prime Minister the offer of a visit to his constituency, but I noticed that he left out a guarantee of safety for her, without which I hesitate to think that she will take up the offer.
Finally, we heard a speech from my hon. Friend the Member for The Wrekin (Mr. Grocott). The unpleasant term "retread" has been fashioned to describe the speeches of people who return to the House. My hon. Friend made an excellent speech about the needs and hopes of his constituents. He also made the important point that when discussing the Finance Bill, we should bear in mind that its purpose, and indeed the purpose of economic policy, is to be the servant of the people and not their master.
I welcome the Chief Secretary to the Treasury to his position. He said that two main aspects of the Finance Bill are of particular importance — occupational pensions and profit-related pay. I wish to spend some time discussing the merits of profit-related pay because it now forms an important part of the Government's economic strategy and, as I shall attempt to show, of the Government's admission of their own economic failure.
When debating profit-related pay, we are considering not whether the system is desirable, but whether it is right to give a substantial tax incentive to go down a particular remuneration path. We are not debating the principle of profit-related pay alone, but the fiscal incentives for its introduction that the Finance Bill provides. In its submission to the Government, the Institute of Personnel Management rightly asked why profit-related pay is being singled out for this fiscal benefit when bonus systems and other productivity-related schemes are not. The estimated Treasury cost of profit-related pay for next year is about £50 million, but, depending on the extent to which the scheme is taken up, the fiscal costs could run to something like £500 million, or even, on some estimates, as much as £1,000 million over a period. We must judge the efficacy of profit-related pay against the fiscal incentive and the amount that it will cost the Exchequer.
The immediate effect of implementing the Finance Bill changes will be to give someone—for example, a senior executive or manager—who takes the maximum benefit of £3,000, half of it tax-free, a possible £20 a week in tax cuts for doing nothing other than taking the prospective risk of a fall in profits in the future. That is the immediate effect that profit-related pay will have on people on higher incomes. Furthermore, the money for that tax incentive will be found from the general burden on taxpayers, many of whom—indeed, all those who work in the public sector—will have no prospect of participating in the scheme.
No one is in any way constrained from negotiating profit-related pay at present if he wishes to do so. The Bill provides that if people enter into the arrangements nothing will prevent them from leaving the scheme should they wish to do so.
The arguments advanced make a strong case and it is right to examine them. The first argument is that profit-related pay will make for a greater identification between work force and management. Of course, we welcome any greater identification between workers and management—anything that leads to the eradication of the "them and us" attitude. However, that identification can be achieved through bonus schemes and can perhaps be better achieved by employee share ownership options.
Furthermore, although the Government are prepared to talk about profit-related pay and greater identification of work force with management and the owners of companies, as the Financial Times pointed out, no concomitant advantages are given to the work force in the form of greater information from management. Where are the rights of the work force to have the books opened so that they can check that the scheme is being implemented fairly for both sides? There may be some residual advantage in the greater identification between management and workers that the scheme would provide, but that could probably be better achieved by greater employee share ownership.
The main argument that the Government put forward for profit-related pay is, in effect, a macroeconomic argument, and the proposal is interesting because it illustrates the failure of their policies in other respects. The Government say that this scheme will make a substantial difference to major macroeconomic problems—the cure of unemployment and the restraint of inflation. The idea that profit-related pay would lead to a reduction in unemployment is principally borrowed from an American professor of economics called Martin Weitzman. After the trials of the British economy under the tutelage of Professor Milton Friedman, one would have thought that we would be slightly cautious about turning it over to another American professor.
The theory is that profit-related pay of itself will provide an incentive to employers to employ and that in a recession they will cease to fire workers. The opposite is the case. The danger is that, if a profit-related pay scheme is introduced, there is an incentive for those on the inside of the firm to keep those on the outside out of employment so that those inside can share in the greater profits. That point has been made many times, not least by the British Institute of Management, which was asked for its views. Forty-seven per cent. of its members stated that profit-related pay might restrict investment and recruitment.

When talking of the massive injection of a fiscal incentive into our system, we are entitled to ask whether that money is being used in the best way.
It is argued that profit-related pay has an impact on inflation. The right hon. Member for Guildford (M r. Howell) dissociated himself, rightly, from that argument. We were warned the other day in the House about the shibboleths of the 1930s. What does profit-related pay mean in terms of inflation? It means that in certain circumstances it is possible to cut wages and therefore cut inflation or employment. That is precisely the economic prescription of the 1930s, which was rejected by the people in the 1945 general election. The Government's grateful acceptance of the theory of profit-related pay shows the absence of any real ideas on how to deal with our main economic problems of unemployment and the decline:in our manufacturing base.
The Chancellor has painted a rosy picture of the British economy, saying how well it is doing. He is surprised at the Opposition's criticisms. The dilemma of reconciling the interests of consumption and of investment has become increasingly clear over the past few years. Those fundamental conflicts must be resolved by the Government during the next few years. The consumer boom has become virtually a truism, but growth in consumption during the past few years has virtually doubled economic growth. Department of Trade and Industry figures published earlier this week showed that there had been £3 billion of new loans in May alone—11 per cent. more — [Interruption.] I should have thought that, if Conservative Members wanted to learn the facts of the economy, they would believe the DTI figures. They showed that new loan finance was 11 per cent. more in the three months to the end of May than in the previous three months and 15 per cent. more than a year ago. It is important to realise that that excludes mortage borrowing and bank lending for housing. The consumer boom is not simply part of asset inflation caused by the rise in house prices. It is occurring quite apart from that.
The consumer boom and the build-up of inflationary pressure have been caused also by the wage increases which the Government condemn but from which they like to obtain benefits. An underlying trend of the British economy is the direct conflict between the interests of consumption which the Government are fuelling—tax cuts are just another method of doing that—and the interests of investments. The results of that consumer boom are shown by the Red Book published at the time of the Budget. The Government do not say that the public sector's borrowing is at the root of the problem of high interest rates. On page 11, they say:
Private sector borrowing has been rising and is now over 10 per cent. of GDP. It has clearly contributed more than public borrowing to upward pressure on real interest rates. These trends are likely to persist.
In other words, because of the huge consumer boom, the Government are forced to keep interest rates high to try to squeeze inflation, which means keeping the exchange rate high — the last thing to help the interests of manufacturing. Manufacturing industry wants a competitive exchange rate and lower interest rates. That is the dilemma at the heart of the Government's economic policy.
Of course, manufacturing output has improved recently. However, as the Bank of England made clear in its own quarterly—this comes back to the point that


was made by my hon. Friend the Member for Cardiff, West — the reason that manufacturing output has improved recently is the depreciation of the exchange rate that occurred some time earlier. Those competitive gains are increasingly being taken away and that is why the improvement shown in this year's export volume is down for next year. In other words, that small increase in manufacturing output and that small increase in exports look as if they will decline next year. That is what is happening and, more than anything else, it is what has happened to investment.
The key to understanding the difficulty that the British economy is in is that investment is flat at the same time as company profitability and the consumer boom are increasing. During the past seven or eight years we have seen not only that manufacturing investment is below what it was in 1979; we have seen more than that and a net disinvestment in fixed formation capital stock in the British economy. That is an extraordinary thing to have happened, and it has happened because the link between profitability and investment has been broken. That is why the CBI — hardly a body that is sympathetic to the Labour party or that is ready to paint a gloomy picture of the Government's record — stated in its most recent survey that 25 per cent. of its firms say that capacity constraints are a major obstacle to expansion. In other words, the demand is being produced in the economy, but our manufacturing base is not big enough to take on and meet that demand. That is the difficulty.
The test of that will occur when we see the way in which the balance of payments on the current account progresses during the next few years. It is interesting to note that the Treasury forecast of what happens to the balance of payments in the current account deficit has again had to be revised to the state where the OECD forecasts that next year the current account deficit will be about £4 billion. That is the danger that the economy faces, and that is why I say that there is now a direct conflict between the consumer boom, which increases inflationary pressures, sucks in imports and necessitates a high pound and high interest rates, and the manufacturing sector, with flat investment and declining export opportunities which desperately need low interest rates and a competitive exchange rate.
Perhaps the Financial Secretary can tell me why, if the British economy is a great economic success, as the Chancellor tells us, the Bank of England has had to undergo a change of policy in recent weeks and is now intervening to keep the pound at its current level. The reason is that foreign investors are not giving a vote of confidence to the Government's handling of the economy.
My hon. Friend the Member for Dagenham (Mr. Gould) mentioned the hypothetical case of Great Britain Ltd. The real case is that foreign investment is not flowing into this country and into the City at present because foreign investors fear the problems to which the Labour party has drawn attention during the past few years. The fundamental problem that the Government face, and which we must face, is the absence of a coherent industrial policy. If we do not have a policy for our wealth-generating base, we do not have a policy for the future of the country.

Mr. Ian Bruce: The hon. Gentleman continually suggests that we do not seem able to manufacture enough in the United Kingdom. However, the Government are coming forward with some ideas for manufacturing companies and saying, "Why do you not share some of your profits with your workers, improve productivity and manufacture the goods in the United Kingdom for which this boom is creating demand?" Surely that is a good policy and one on which the hon. Gentleman should congratulate the Government, because we are giving money to the people?

Mr. Blair: The hon. Gentleman will have to forgive me if I do not tend to congratulate illusions. When the Government came to power, we were in surplus in our manufacturing trade. While they have been in power, for the first time in our history we have moved into deficit, and that deficit has increased every year.

Mr. Bruce: Rubbish.

Mr. Blair: The hon. Gentleman should believe his Government's statistics. We are in deficit not merely on our traditional industries but on our new technology industries. The idea that we have thrown out the old industries and brought in the new is nonsense. We are not merely behind in the industries that have had decent pasts, but behind in the industries of the future.
It is against that background that we can measure the plight of our constituencies—against an economy whose future performance will probably not even match its past performance. For the Government's first four years, we were told that economic success would soon arrive and that we should wait patiently for it. Today, and for the past four years, we have been told that economic success has arrived but we have simply failed to recognise it. Tomorrow, and for the next four years, we will be told that economic success has been and gone and, unfortunately, we missed it.
I have to say to my hon. Friends, who have made passionate speeches on behalf of their constituencies and the problems that they face, that when we seek assurances from Ministers whose constituencies have unemployment rates in single figures, whereas ours are at 15 to 20 per cent. or higher, when we ask how a country concerned with its future can have more than 1 million unemployed under the age of 25, when we question how any civilised society can have 10 million to 12 million people below the poverty line, who spend in one week to survive what others spend in a lunchtime to entertain, and when we contrast the reality of our constituents' lives with the rhetoric of those who govern them from a distance, we must face the truth. We have had all the economic recovery that we are getting, and even harder times are ahead.
Some hon. Member have spoken about their booming constituencies. Some parts of the country are booming—

Mr. Keith Mans: Hear, hear.

Mr. Blair: I have to tell the hon. Gentleman, who is applauding that, that I regard a definition of economic success that excludes 30 per cent. of the country as no definition of economic success at all. It is fundamentally contrary to the interests of our democracy, not just the interests of our economy, that we should exclude swathes of the country and whole constituencies from the benefits of prosperity. We should not forget that this Government have had the greatest bonanza in economic history. They


have had £60 billion-worth of oil revenue. To set that in context, it would have meant between 6p and 7p off the standard rate of income tax for every year of the Thatcher Government. The Government have sold £30 billion-worth of our assets, and still we have 3 million unemployed and the other problems of our economy.
When I read the report of the debates on the Education Act 1944 the other day, I noticed that the tone of the speeches was very different from the tone of the speeches that we hear now. When that great piece of reforming legislation was going through the House, hon. Members on both sides realised that the country had tremendous problems and that it was in the interests of everyone to deal with those problems. In that debate, Rab Butler said that education must
be accessible to all, whatever their financial circumstances."
—[Official Report, 19 January 1944; Vol 396, c. 222–3.]
I link that with the employment White Paper published the same year, which said that the responsibility and duty of Government was to ensure full employment to the extent that they could. It is extraordinary that, 40 years on, we are debating not how we achieve those things, but whether it is desirable for the state even to attempt to achieve them.
Governments have faced, and will face, problems as profound and serious as those which face this Government. Of that I am sure. But it is the unique quality of this Administration that, even after eight years, they deny any responsibility for creating the problems and, worse, disclaim any duty to resolve them. This debate is about the role and proper scope of Government as much as it is about specific policies and issues which will be the constant theme of the party battle in this Parliament.
The Bill abdicates responsibility for the unemployed and denies the rights of those who are poor. Therefore, because it is irrelevant to the fundamental problems that we face, we shall vote against it in the Lobby tonight.

The Financial Secretary to the Treasury (Mr. Norman Lamont): I am glad that, in the last minute of his speech, the hon. Member for Sedgefield (Mr. Blair) explained why he would vote against the Finance Bill. He spent a lot of time attacking things that were not in the Bill, but he did not deal with the Bill or explain why he intended to vote against it.
I agree warmly with the hon. Member for Sedgefield on one thing, and that is on the quality of the maiden speeches that we have heard. I believe that it was Winthrop Mackworth Praed who once commented on a maiden speech — it is clear from the expression of the hon. Member for Dagenham (Mr. Gould) that he has forgotten him. Winthrop Mackworth Praed was a minor poet and also a former Member for Marylebone. He once referred to a maiden speech as one that
All men praised, but none remember.
I shall certainly remember some of the speeches that we have heard today.
My hon. Friend the Member for Daventry (Mr. Boswell) made an extremely eloquent speech. He told us about the delights of his constituency, including the apricot trees. I am afraid that I must confess that I was not sure that there were apricot trees in England. My hon. Friend also told us about some of his predecessors, and he left us in no doubt about his desire to serve his constituency. At the same time, he made a plea for the

inner cities. He also warmly praised—I am sure that it was welcomed by my hon. Friends—the courage of Reg Prentice.
As the hon. Member for Sedgefield said, the hon. Member for Cardiff, West (Mr. Morgan) made an extremely witty speech. I for one especially appreciated his remarks about the alliance being a "democratic fission". I also appreciated his comments about his predecessor, Stefan Terlezki, who is certainly remembered with great affection by my hon. Friends. The hon. Gentleman said that the only thing that he had in common with Stefan Terlezki was the struggle that they both had to speak the English language. He went on to describe the linguistic difficulties that members of the parliamentary Labour party had in talking to each other. That difficulty appeared to be borne out by the maiden speech of the hon. Member for Western Isles (Mr. Macdonald), who addressed the House in what the hon. Member for Sedgefield told us was Gaelic.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) made an extremely impressive speech. He also spoke about the beauties of his constituency and said that Stamford was the loveliest stone town in England. I certainly agree with that. He went on to discuss, with great authority, the supply side of the economy and shortages of labour in the advanced electronic industries, and he strongly emphasised that whatever problems the economy may have macroeconomic demand deficiency is not one of them.
The hon. Member for Western Isles made a moving speech when he described the problems of the crofting industry and the economy of the isles. I know that my hon. Friend the Member for Stirling (Mr. Forsyth), who has been transferred to the Scottish Office, will have paid attention to what he said about tax relief for the forestry industry.
I am sure we would all agree that the hon. Member for Motherwell, North (Dr. Reid) made an extremely powerful speech. If I said that I disagreed with a lot of it, I know that the hon. Gentleman would certainly regard that as a compliment. However, that does not mean that his speech did not make a great impact. It was an impressive speech and we look forward to hearing him again.
The hon. Member for The Wrekin (Mr. Grocott) made, not quite a maiden speech, but a reappearance. Obviously, being in the outside world has done nothing to dim his optimism, because he said that he would have to oppose the Government for perhaps as long as four years. He also referred to the fact that the Government were loathed by the people of The Wrekin. However, on consulting the record I discovered that no fewer than 26,200 people in The Wrekin chose to vote for the Conservative party.
I did not hear the speeches of the hon. Members for Manchester, Withington (Mr. Bradley), for Clydesdale (Mr. Hood) or for Clwyd, South-West (Mr. Jones), but I am told that their speeches were up to the extremely high standard that we have had in this debate.
Many matters were raised that are not strictly in the Finance Bill. We have had pleas for the next public expenditure round. My right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) made a plea for strong regional policy. My hon. Friend the Member for Beaconsfield (Mr. Smith) referred to the taxation of husband and wife and urged on us the development of the policies in the Green Paper.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) adopted a rather untypical hard-nosed approach—I am sorry that he is not here—and took the Treasury to task because we had hung out expensive new flags in Parliament square. I have no doubt that that is a matter to which the Public Accounts Committee will turn its mind. The right hon. Gentleman also talked about the harmonisation of VAT and excise duty within the Community. I do not need to tell him that the Commission has not yet produced its proposals, and the Government have the power to veto any proposal which they decide are unacceptable.
The hon. Member for Dagenham devoted a considerable part of his speech to the economy, but said very little about the Finance Bill. His stress and emphasis on the economy were very different from what they were before the election. We were clearly told that no major crisis was in the offing. The hon. Gentleman decided to adopt the approach of Frank Sinatra and accentuate the positive. We were told that the balance of payments situation was manageable.
All this was very different from the approach that used to be adopted by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Indeed, the hon. Member for Dagenham said that, overall, there was a not unpromising outlook. Coming from the hon. Gentleman, that is positive euphoria. It is very similar to the language that was formerly used by the hon. Member for Great Grimsby (Mr. Mitchell), who before the election always warned the Opposition not to be too pessimistic or to cry wolf too often about the economy. But, of course, the hon. Member for Great Grimsby speaks with special authority as the author of a book called "Can Labour Win Again?"
The hon. Member for Dagenham compared the economy with a company coming to the market in a privatisation issue. He chose to speculate about "United Kingdom Ltd." being floated. Today it would probably be known as "United Kingdom plc". However, it was fascinating to learn that the hon. Gentleman is himself interested in the sorts of questions that investors would ask. Never before has the Labour party been interested in investors. It was also extremely interesting to learn that the hon. Gentleman thought that the logic of privatisation was that it would lead people to ask questions about efficiency and the use of resources, and that that was a good justification for privatisation. However, my hon. Friend the Member for Beaconsfield pointed out that in this company the shareholders have already voted, and have given a resounding vote of confidence in the existing board of directors.
My right hon. and learned Friend the Member for Richmond, Yorks also spoke about the economy and said that perhaps the greatest threat to the United Kingdom economy comes from external factors. He referred in particular to the United States budget deficit. How very different that is today from what it was a few years ago. Only a few years ago Labour Members were always telling us that we should be following the example of the United States by increasing the budget deficit. Today, not just in this country, but internationally and in the United States, it is clearly recognised that there is a need for that budget deficit to be reduced.
My hon. Friend the Member for Kensington (Sir B. Rhys Williams) made a point about the procedure for the

Bill, and took some exception to the Ways and Means resolutions and the absence, as he saw it, of debate. There are not a huge number of changes in the Bill. In fact, there are few changes from the original Bill. There are some drafting changes, as those of us who participate in Finance Bill debates will understand. Alas, there are always drafting changes, even in the course of a Bill's passage. In fairness to my hon. Friend, I must say that there has been time for consideration of the Bill, considering that we made it crystal clear that we were going to reintroduce the clauses that had to be dropped. They have been reintroduced almost entirely in the form in which they were before. Where there have been some changes, that has been in response to consultations and representations from outside.
Some of my hon. Friends referred to the changes that have been made in the taxation of life assurance companies, or, rather, the capital gains of policyholders. As hon. Members may recall, the Finance Bill has merged the corporation and capital gains tax charges for companies and, in the original Bill, that also applied to the capital gains of policyholders — the investors in life policies. My right hon. Friend the Member for Worthing (Mr. Higgins) and others of my hon. Friends maintained that that was unfair. The point made by my hon. Friend the Member for Beaconsfield was that, if we examine the whole area of savings and the different tax reliefs that are available for savings, and if we are attached to the concept of a level playing field for savings, we are taxing the capital gains of policyholders in a different way from those of investors in other savings media. We do not agree with all that argument, and we have decided for the moment to leave the position of policyholders' gains as it is. There is to be a more general review of the taxation of life assurance.

Mr. Higgins: What other areas of tax penalties are being imposed retrospectively by legislation?

Mr. Lamont: My right hon. Friend says "retrospectively" because the capital gain that has been accumulated has been accumulated over a period of years: but the logic of that argument is that any change in the rate of capital gains would be retrospecitive at any time unless one altered the base date of the capital gains tax legislation. We can debate that point again, but I do not accept that it means that the changes are in any sense retrospective. I am sure that my right hon. Friend will press that point, but I hope that he will at least welcome the concession that we have made.
The hon. Member for Caithness and Sutherland (Mr. Maclennan) did not like the changes that we have made on merging capital gains and corporation tax for companies. To the Government, that seems a desirable simplification. For small companies it will mean that the rate on capital gains is reduced to 27 per cent. With the reduction in corporation tax rate to 35 per cent., the difference between the capital gains rate and the corporation tax rate did not appear great, and it seemed a desirable simplification of the tax system to merge the two. For companies, there are often a wide range of choices as to whether gains are taken as capital gains or as income. I am sorry that the hon. Gentleman has not welcomed that change.
Nor did he welcome—in fact, he opposed — the changes that we have made for transfers into interest in


possession trusts. That is done, as he said, specifically to help independent businesses, and to help those that are held in trusts. I am sure that a man of the hon. Gentleman's experience will recognise that, quite apart from its position in tax, a trust has a function in relation to the continuity of businesses, that is why we have made that change.
A number of my hon. Friends, including the hon. Member for Christchurch (Mr. Adley), referred to the taxation of Lloyd's and to reinsurance to close. The problem that gave rise to the original proposals was the denial that the Inland Revenue had any locus in assessing reinsurance to close in terms of tax deductibility. We could not accept that position. If the existing law were left unchanged, the amount of tax deduction for reinsurance to close would be determined by the agent without review by the inspector of taxes. We believed that that could not be right in principle—hence the need for legislation. We have stuck to that position and I believe that we have achieved a form which makes it crystal clear that the Revenue has a locus in examining the potential deductibility of reinsurance to close but which also takes account of the special characteristics of Lloyd's, especially in terms of its long-term business and the need to protect the flexibility of the Lloyd's market.
Two of the most important parts of the Bill relate to pensions. The provisions relating to personal portable pensions were very much welcomed by my right hon. Friend the Member for Guildford (Mr. Howell). I am sorry that the hon. Member for Dagenham could not give the proposals a warmer welcome. I do not know to what extent he has seriously considered the matter, but I thought that it was a pity that he took the line that personal pensions might undermine the final salary schemes of big companies. He seemed to be accepting somewhat uncritically the line peddled by certain sections of the pensions industry that there is something sacrosanct about big company schemes and that it is wrong for the individual to be able to have his own personal pension with the value of his investment actually accruing to him. I read in the newspapers that the hon. Gentleman is well respected in the City, and clearly he goes there a good deal, but I hope that he will not believe everything that he is told about company pensions by people there.
The hon. Member for Dagenham might perhaps listen to my hon. Friend the Member for Kensington who for many years has been a critic of final salary schemes because, as he puts it, they involve an element of subsidy to certain people and because there are considerable problems for early leavers. My hon. Friend has criticised the Government for not doing enough about the early leaver problem, although we have taken steps with regard to transfer values. We have also taken steps to improve mobility through personal pensions provisions. I hope that the Labour party will take a more constructive view of that.
We have also had to take action against certain abuses. My hon. Friends will appreciate that pensions as savings vehicles are subject to enormous tax privileges. My hon. Friend the Member for Kensington asked why we were cutting off the tax-free lump sum provision at £150,000. Some Opposition Members may be amazed at our modesty. In fact, it is a tax-free perk. As my hon. Friend the Member for Kensington knows, it is a matter of pension being commuted to a lump sum and paid tax-free. Moreover, the contributions which create the lump sum

are themselves tax deductible when they are made. As my hon. Friend the Member for Kensington has recognised, we have seen some amazing contrivances and tax avoidance devices. That is why we have examined the lump sum and why we have considered the question of accelerated accrual. Situations have arisen in which people want two thirds pensions within a 10-year period and they have been making huge payments equivalent to 150 per cent. of salaries. That is why we have decided that action must be taken against those abuses.
My right hon. Friend the Member for Guildford welcomed the provisions in the Bill for profit-related pay. I am sorry that Opposition Members did not react more constructively to tax reliefs for profit-related pay. The hon. Member for Sedgefield seemed to believe that there was something wrong with profit-related pay because one of the main authorities in favour of its was an American. His attitude seems to be "stick to Hungarians" on these matters.
We have sought to introduce profit-related pay because we believe that it can bring a much-needed flexibility to the labour market. Opposition Members have tried to characterise profit-related pay as a policy for low pay. However, profit-related pay seeks to make all pay—high, low and average pay — responsive to market conditions and the ability of firms to pay. Not only Conservative politicians, but Labour Ministers when Labour was in office, criticised the concept of the going rate and the ritual of the annual round. Conservative politicians and, previously, Labour Ministers have drawn a connection between unaffordable wage increases and unemployment.
My right hon. and learned Friend the Member for Richmond, Yorks said that relating pay to the overall success of a company provides a cushion against changing circumstances. As profits rise, employees can benefit from higher pay. If profits fall, from the company's point of view, some adjustment can be made in the form of lower profit-related pay and therefore lower labour costs can be achieved. In present circumstances, many companies believe that the only flexibility they possess lies in reducing the number of employees.
Opposition Members, including the hon. Member for Sedgefield, have stated that employees cannot be expected to take risks with the fortunes of their companies. They are already involved in the fortunes of their companies. If profits go down and if the company is in difficulty, redundancy is likely. Those are the circumstances in which profit-related pay can be a cushion and insurance. By creating more flexibility, in the long run it can also provide more employment.
The hon. Member for Caithness and Sutherland felt that there should be tax relief for the employer. However, employers have every incentive to introduce profit-related pay. Today, the incentive is needed to get the concept and idea understood by the work force. That is why the incentive is concentrated on the pay cheque. We must get the incentive to the labour force and convince it of the logic of the idea.
With this Bill, we are pressing ahead again with the programme of tax reform that we have followed consistently since 1979. The Bill keeps up the momentum of reform. We have introduced a series of measures to streamline and simplify tax collection and lighten the administrative burden and we have introduced the opportunity for people to participate in new profit-related


pay schemes. For individuals, we are also bringing forward innovative personal pensions that will offer new choice and flexibility.
We have introduced the Bill quickly because we believe that those ideas are important. We want to see them on the statute book as quickly as possible. For that reason, I commend the Bill to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 319, Noes 202.

Division No. 13]
[10 pm


AYES


Adley, Robert
Carlisle, Kenneth (Lincoln)


Aitken, Jonathan
Carrington, Matthew


Alexander, Richard
Cartwright, John


Alison, Rt Hon Michael
Cash, William


Allason, Rupert
Chapman, Sydney


Alton, David
Chope, Christopher


Amess, David
Churchill, Mr


Amos, Alan
Clark, Dr Michael (Rochford)


Arbuthnot, James
Clark, Sir W. (Croydon S)


Arnold, Jacques (Gravesham)
Clarke, Rt Hon K. (Rushcliffe)


Arnold, Tom (Hazel Grove)
Colvin, Michael


Ashby, David
Conway, Derek


Ashdown, Paddy
Coombs, Anthony (Wyre F'rest)


Atkins, Robert
Coombs, Simon (Swindon)


Atkinson, David
Cope, John


Baker, Rt Hon K. (Mole Valley)
Cormack, Patrick


Baker, Nicholas (Dorset N)
Couchman, James


Baldry, Tony
Cran, James


Banks, Robert (Harrogate)
Currie, Mrs Edwina


Barnes, Mrs Rosie (Greenwich)
Davies, Q. (Stamf'd &amp; Spald'g)


Batiste, Spencer
Davis, David (Boothferry)


Beaumont-Dark, Anthony
Day, Stephen


Beith, A. J.
Devlin, Tim


Bellingham, Henry
Dickens, Geoftrey


Bendall, Vivian
Dorrell, Stephen


Bennett, Nicholas (Pembroke)
Douglas-Hamilton, Lord James


Benyon, W.
Dover, Den


Bevan, David Gilroy
Dunn, Bob


Biffen, Rt Hon John
Durant, Tony


Biggs-Davison, Sir John
Dykes, Hugh


Blackburn, Dr John G.
Eggar, Tim


Blaker, Rt Hon Sir Peter
Emery, Sir Peter


Body, Sir Richard
Evans, David (Welwyn Hatf'd)


Bonsor, Sir Nicholas
Evennett, David


Boscawen, Hon Robert
Fairbairn, Nicholas


Boswell, Tim
Fallon, Michael


Bottomley, Peter
Farr, Sir John


Bottomley, Mrs Virginia
Favell, Tony


Bowden, Gerald (Dulwich)
Fearn, Ronald


Bowis, John
Fenner, Dame Peggy


Boyson, Rt Hon Dr Sir Rhodes
Field, Barry (Isle of Wight)


Braine, Rt Hon Sir Bernard
Finsberg, Sir Geoffrey


Brandon-Bravo, Martin
Fookes, Miss Janet 

Brazier, Julian
Forman, Nigel


Bright, Graham
Forsyth, Michael (Stirling)


Brittan, Rt Hon Leon
Forth, Eric


Brooke, Hon Peter
Fowler, Rt Hon Norman


Brown, Michael (Brigg &amp; Cl't's)
Fox, Sir Marcus


Browne, John (Winchester)
Franks, Cecil


Bruce, Ian (Dorset South)
Freeman, Roger


Bruce, Malcolm (Gordon)
French, Douglas


Buchanan-Smith, Rt Hon Alick
Fry, Peter


Buck, Sir Antony
Gale, Roger


Budgen, Nicholas
Gardiner, George


Burns, Simon
Gill, Christopher


Burt, Alistair
Glyn, Dr Alan


Butcher, John
Goodhart, Sir Philip


Butler, Chris
Goodlad, Alastair


Butterfill, John
Goodson-Wickes, Dr Charles


Campbell, Menzies (Fife NE)
Gorman, Mrs Teresa


Carlile, Alex (Mont'g)
Gorst, John


Carlisle, John, (Luton N)
Gow, Ian





Gower, Sir Raymond
Maclennan, Robert


Grant, Sir Anthony (CambsSW)
McLoughlin, Patrick


Greenway, Harry (Ealing N)
McNair-Wilson, M. (Newbury)


Greenway, John (Rydale)
McNair-Wilson, P. (New Forest)


Gregory, Conal
Madel, David


Griffiths, Sir Eldon (Bury St E')
Major, Rt Hon John


Griffiths, Peter (Portsmouth N)
Malins, Humfrey


Grist, Ian
Mans, Keith


Ground, Patrick
Maples, John


Grylls, Michael
Marland, Paul


Gummer, Rt Hon John Selwyn
Marlow, Tony


Hamilton, Neil (Tatton)
Marshall, Michael (Arundel)


Hampson, Dr Keith
Martin, David (Portsmouth S)


Hannam, John
Mates, Michael


Hargreaves, A, (B'ham H'll Gr')
Maude, Hon Francis


Hargreaves, Ken (Hyndburn)
Mawhinney, Dr Brian


Harris, David
Mayhew, Rt Hon Sir Patrick


Haselhurst, Alan
Meyer, Sir Anthony


Hawkins, Christopher
Miller, Hal


Hayes, Jerry
Mills, Iain


Hayhoe, Rt Hon Sir Barney
Miscampbell, Norman


Hayward, Robert
Mitchell, Andrew (Gedling)


Heathcoat-Amory, David
Mitchell, David (Hants NW)


Heddle, John
Moate, Roger


Heseltine, Rt Hon Michael
Monro, Sir Hector


Hicks, Mrs Maureen (Wolv' NE)
Montgomery, Sir Fergus


Hicks, Robert (Cornwall SE)
Moore, Rt Hon John


Higgins, Rt Hon Terence L.
Morris, M (N'hampton S)


Hind, Kenneth
Morrison, Hon C. (Devizes)


Hogg, Hon Douglas (Gr'th'm)
Morrison, Hon P (Chester)


Holt, Richard
Moss, Malcolm


Hordern, Sir Peter
Moynihan, Hon C.


Howard, Michael
Mudd, David


Howarth, Alan (Strat'd-on-A)
Neale, Gerrard


Howarth, G. (Cannock &amp; B'wd)
Nelson, Anthony


Howell, Rt Hon David (G'dford)
Neubert, Michael


Howell, Ralph (North Norfolk)
Newton, Tony


Howells, Geraint
Nicholls, Patrick


Hughes, Robert G. (Harrow W)
Nicholson, David (Taunton)


Hughes, Simon (Southwark)
Nicholson, Miss E. (Devon W)


Hunt, David (Wirral W)
Onslow, Cranley


Hunt, John (Ravensbourne)
Oppenheim, Phillip


Hunter, Andrew
Owen, Rt Hon Dr David


Irvine, Michael
Page, Richard


Irving, Charles
Paice, James


Jack, Michael
Patten, Chris (Bath)


Janman, Timothy
Patten, John (Oxford W)


Jessel, Toby
Pawsey, James


Johnson Smith, Sir Geoffrey
Peacock, Mrs Elizabeth


Johnston, Sir Russell
Porter, David (Waveney)


Jones, Gwilym (Cardiff N)
Portillo, Michael


Jones, Robert B (Herts W)
Powell, William (Corby)


Kellett-Bowman, Mrs Elaine
Price, Sir David


Key, Robert
Raffan, Keith


King, Roger (B'ham N'thfield)
Rathbone, Tim


King, Rt Hon Tom (Bridgwater)
Renton, Tim


Kirkhope, Timothy
Rhodes James, Robert


Kirkwood, Archy
Rhys Williams, Sir Brandon


Knapman, Roger
Riddick, Graham


Knight, Greg (Derby North)
Ridley, Rt Hon Nicholas


Knight, Dame Jill (Edgbaston)
Ridsdale, Sir Julian


Knox, David
Rifkind, Rt Hon Malcolm


Lamont, Rt Hon Norman
Roberts, Wyn (Conwy)


Lang, Ian
Roe, Mrs Marion


Latham, Michael
Rowe, Andrew


Lawrence, Ivan
Rumbold, Mrs Angela


Lawson, Rt Hon Nigel
Ryder, Richard


Leigh, Edward (Gainsbor'gh)
Sackville, Hon Tom


Lester, Jim (Broxtowe)
Sainsbury, Hon Tim


Lightbown, David
Sayeed, Jonathan


Lilley, Peter
Scott, Nicholas


Lloyd, Sir Ian (Havant)
Shaw, David (Dover)


Lloyd, Peter (Fareham)
Shaw, Sir Giles (Pudsey)


Lord, Michael
Shaw, Sir Michael (Scarb')


Luce, Rt Hon Richard
Shelton, William (Streatham)


Lyell, Sir Nicholas
Shephard, Mrs G. (Norfolk SW)


McCrindle, Robert
Shepherd, Colin (Hereford)


MacGregor, John
Shersby, Michael


MacKay, Andrew (E Berkshire)
Sims, Roger


Maclean, David
Smith, Cyril (Rochdale)






Smith, Sir Dudley (Warwick)
Thorne, Neil


Smith, Tim (Beaconsfield)
Townsend, Cyril D. (B'heath)


Soames, Hon Nicholas
Vaughan, Sir Gerard


Speed, Keith
Waddington, Rt Hon David


Spicer, Jim (Dorset W)
Wakeham, Rt Hon John


Spicer, Michael (S Worcs)
Walker, Bill (T'side North)


Squire, Robin
Wallace, James


Steel, Rt Hon David
Warren, Kenneth


Steen, Anthony
Wheeler, John


Stern, Michael
Widdecombe, Miss Ann


Stewart, Allan (Eastwood)
Wiggin, Jerry


Stewart, Andrew (Sherwood)
Wilkinson, John


Stewart, Ian (Hertfordshire N)
Wolfson, Mark


Sumberg, David
Wood, Timothy


Summerson, Hugo
Young, Sir George (Acton)


Taylor, Ian (Esher)



Taylor, John M (Solihull)
Tellers for the Ayes:


Taylor, Matthew (Truro)
Mr. Tristan Garel-Jones and


Temple-Morris, Peter
Mr. Mark Lennox-Boyd.


Thompson, D. (Calder Valley)





NOES


Abbott, Ms Diane
Evans, John (St Helens N)


Allen, Graham
Ewing, Harry (Falkirk E)


Anderson, Donald
Ewing, Mrs Margaret (Moray)


Archer, Rt Hon Peter
Fatchett, Derek


Armstrong, Ms Hilary
Faulds, Andrew


Ashton, Joe
Field, Frank (Birkenhead)


Banks, Tony (Newham NW)
Fields, Terry (L'pool B G'n)


Barnes, Harry (Derbyshire NE)
Flannery, Martin


Barron, Kevin
Flynn, Paul


Battle, John
Foot, Rt Hon Michael


Beckett, Margaret
Foster, Derek


Bell, Stuart
Fraser, John


Benn, Rt Hon Tony
Fyfe, Mrs Maria


Bermingham, Gerald
Galbraith, Samuel


Bidwell. Sydney Galloway, George


Blair, Tony
Garrett, John (Norwich South)


Boateng, Paul
Garrett, Ted (Wallsend)


Boyes, Roland
George, Bruce


Bradley, Keith
Gilbert, Rt Hon Dr John


Brown, Gordon (D'mline E)
Godman, Dr Norman A.


Brown, Nicholas (Newcastle E)
Golding, Mrs Llin


Brown, Ron (Edinburgh Leith)
Gordon, Ms Mildred


Buchan, Norman
Gould, Bryan


Buckley, George
Graham, Thomas


Caborn, Richard
Grant, Bernie (Tottenham)


Callaghan, Jim
Griffiths, Nigel (Edinburgh S)


Campbell, Ron (Blyth Valley)
Grocott, Bruce


Campbell-Savours, D. N.
Hardy, Peter


Canavan, Dennis
Harman, Ms Harriet


Cartwright, John
Healey, Rt Hon Denis


Clark, Dr David (S Shields)
Heffer, Eric S.


Clarke, Tom (Monklands W)
Henderson, Douglas


Clay, Bob
Hogg, N. (C'nauld &amp; Kilsyth)


Clelland, David
Holland, Stuart


Clwyd, Mrs Ann
Home Robertson, John


Cohen, Harry
Hood, James


Coleman, Donald
Howarth, George (Knowsley N)


Cook, Frank (Stockton N)
Howell, Rt Hon D. (S'heath)


Cook, Robin (Livingston)
Hoyle, Doug


Corbett, Robin
Hughes, John (Coventry NE)


Corbyn, Jeremy
Hughes, Robert (Aberdeen N)


Cousins, Jim
Hughes, Roy (Newport E)


Cox, Tom
Hughes, Sean (Knowsley S)


Crowther, Stan
Ingram, Adam


Cryer, Bob
Janner, Greville


Cunliffe, Lawrence
John, Brynmor


Dalyell, Tarn
Jones, Barry (Alyn &amp; Deeside)


Darling, Alastair
Jones, leuan (Ynys Môn)


Davies, Rt Hon Denzil (Llanelli)
Jones, Martyn (Clwyd S W)


Davies, Ron (Caerphilly)
Kaufman, Rt Hon Gerald


Davis, Terry (B'ham Hodge H'l)
Lambie, David


Dewar, Donald
Leighton, Ron


Dobson, Frank
Lestor, Miss Joan (Eccles)


Doran, Frank
Lewis, Terry


Douglas, Dick
Litherland, Robert


Dunnachie, James
Livsey, Richard


Dunwoody, Hon Mrs Gwyneth
Lloyd, Tony (Stretford)


Eastham, Ken
Lofthouse, Geoffrey





Loyden, Eddie
Robertson, George


McAllion, John
Robinson, Geoffrey


McCartney, Ian
Rogers, Allan


Macdonald, Calum
Rooker, Jeff


McFall, John
Ross, Ernie (Dundee W)


McKay, Allen (Penistone)
Rowlands, Ted


McKelvey, William
Ruddock, Ms Joan 

McLeish, Henry
Salmond, Alex


McWilliam, John
Sedgemore, Brian


Madden, Max
Sheldon, Rt Hon Robert


Mahon, Mrs Alice
Shore, Rt Hon Peter


Marek, Dr John
Short, Clare


Marshall, Jim (Leicester S)
Skinner, Dennis


Martin, Michael (Springburn)
Smith, Andrew (Oxford E) 

Martlew, Eric
Smith, C. (Isl'ton &amp; F'bury)


Maxton, John
Smith, Rt Hon J. (Monk'ds E)


Meacher, Michael
Snape, Peter


Meale, Alan
Soley, Clive


Michael, Alun
Spearing, Nigel


Michie, Bill (Sheffield Heeley)
Steinberg, Gerald


Millan, Rt Hon Bruce
Stott, Roger


Mitchell, Austin (G't Grimsby)
Strang, Gavin


Moonie, Dr Lewis
Straw, Jack


Morgan, Rhodri
Taylor, Mrs Ann (Dewsbury)


Morley, Elliott
Thomas, Dafydd Elis


Morris, Rt Hon A (W'shawe)
Turner, Dennis


Morris, Rt Hon J (Aberavon)
Vaz, Keith


Mowlam, Mrs Marjorie
Wall, Pat


Mullin, Chris
Walley, Ms Joan


Murphy, Paul
Warden, Gareth (Gower)


Nellist, Dave
Wareing, Robert N.


Oakes, Rt Hon Gordon
Welsh, Andrew (Angus E)


O'Brien, William
Wigley, Dafydd


O'Neill, Martin
Williams, Rt Hon A. J.


Orme, Rt Hon Stanley
Williams, Alan W. (Carm'then)


Pendry, Tom
Wilson, Brian


Pike, Peter
Winnick, David


Powell, Ray (Ogmore)
Wise, Mrs Audrey


Prescott, John
Worthington, Anthony


Primarolo, Ms Dawn
Wray, James


Randall, Stuart
Young, David (Bolton SE)


Redmond, Martin



Reid, John
Tellers for the Noes:


Richardson, Ms Jo
Mr. Don Dixon and


Roberts, Allan (Bootle)
Mr. Frank Haynes.

Question accordingly agreed to.

Ordered, That the Bill be committed to a Committee of the whole House.—[Mr. Maclean.]

Committee tomorrow.

It being after Ten o'clock, MR. SPEAKER proceeded to put forthwith the Question which he was directed by paragraph (1) of Standing Order No. 53 (Questions on voting of estimates, &amp;c.) to put at that hour.

SUPPLEMENTARY ESTIMATES 1987–88

Resolved
That a supplementary sum not exceeding £1,064,266,001) be granted to Her Majesty out of the Consolidated fund to defray the charges for Defence and Civil Services which will come in course of payment for the year ending on 31st March 1988, as set out in House of Commons Paper No. 16.— [Mr. Norman Lamont]

Bill ordered to be brought in upon the foregoing resolution by the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. John Major, Mr. Peter Brooke and Mr. Peter Willey.

Orders of the Day — CONSOLIDATED FUND (APPROPRIATION) BILL

Mr. Norman Lamont accordingly presented a Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31st March 1988, and to appropriate the supplies granted in this Session of Parliament:And the same was read the first time; and ordered to be read a Second time tomorrow and to be printed. [Bill 8].

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the Motion relating to the Channel Tunnel Bill may be proceeded with, though opposed,

until half-past Eleven o'clock, or one and a half hours after it has been entered upon, whichever is the later.— [Mr. Garel-Jones.]

Orders of the Day — Defence

The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Roger Freeman): I beg to move,
That the draft Army, Air Force and Naval Discipline Acts (Continuation) Order 1987, which was laid before this House on 26th June, be approved.
The purpose of the order is to continue in force for a further year——

Mr. Speaker: Order. Will hon. Members beyond the Bar please leave the Chamber.

Mr. Freeman: The purpose of the order is to continue in force for a further year the Army and Air Force Acts 1955 and the Naval Discipline Act 1957, which together provide the basis for the disciplinary arrangements in the three services. The concept of annual parliamentary approval for the special legal positon of the service man or woman, subject as he or she is to constraints of military discipline as well as the rule of civil law, is a long-established one in British constitutional practice. Every fifth year the opportunity is taken to review in depth the needs of the service disciplinary systems, and an Armed Forces Act is passed making such amendments to the systems as are considered necessary. The most recent such Act was passed in 1986.
The Select Committee that considered the 1986 Act accepted that on balance the procedure under which such Bills are introduced quinquennially, with annual continuation orders such as I am moving today proposed in the intervening years, is the right way to ensure that the working of the service discipline Acts is kept under review by Parliament. The annual debate on the continuation order allows us to debate matters affecting service discipline and welfare. In addition, it provides me with an opportunity to pay a wholehearted tribute to the skill and dedication of our armed forces. Their professionalism is founded in part upon a sound disciplinary system that will be continued with the order, which I invite the House to approve.

Mr. Martin J. O'Neill: As the Under-Secretary of State said, the order provides an opportunity for us to keep under review the Armed Forces Act. It enables us to seek from the Minister something in the way of a progress report, not least in the light of the work of last year's Select Committee that considered what was then the Bill. I had hoped that the Minister would be more fulsome in his justification of the order. I hope that when he replies to the debate he will address himself to some of the issues that I intend to raise and to the matters that some of my hon. Friends will bring to his attention.
It has been said that the purpose of the review is to ensure that volunteer service men and women who give up some of the civil liberties that we enjoy as private citizens—they forgo some of these civil liberties to protect our civil liberties—can carry out their activities within the services in a fair, reasonable and just way.
Last year the House debated the quinquennial Armed Forces Bill. At that time considerable misgivings were expressed—certainly by Opposition Members—about some of the Government's antics and attitudes. It was unfortunate that, at the time, the Select Committee on the

Armed Forces Bill was denied the right to call on the hon. Member for Newry and Armagh (Mr. Mallon), who wished to give oral evidence concerning the UDR. The Committee was denied the right to call Mr. Calcutt to give evidence concerning the Cyprus spy inquiry. It was also denied oral evidence from the Campaign for Homosexual Equality on matters relating to homosexuality in the armed forces. We recognise that such matters still require consideration, and we hope that in response to the debate the Minister will provide us with more information. [Interruption.] Is it necessary, Mr. Deputy Speaker, for hon. Members to carry on conversations in the House when we are trying to deal with important matters?

Mr. Deputy Speaker (Sir Paul Dean): Order. I am finding it difficult to hear the debate. I hope that hon. Members who are not listening to the debate will withdraw from the Chamber.

Mr. O'Neill: One of the problems in the armed forces is that of morale. In a highly disciplined force the like of which we have in this country, the significance of morale can never be underestimated. It is an integral part of order within the armed forces.
In recent years we have seen a 25 per cent. increase in the number of skilled personnel leaving the armed forces. A substantial number of pilots, whose training has cost in excess of £3 million, are taking premature voluntary retirement. It could be that orders of the kind that we are discussing have been contributing factors. Certainly, morale is significant. In the Royal Navy the decline in the size of the fleet and the number of frigates have been contributory factors. About 70 per cent. of RAF married quarters are regarded as substandard. It is fair to say that, if we point to inadequate housing in civilian society as being a contributory factor to the breakdown of order, there must be a recognition of the inadequacy of housing standards as something that could undermine order. We cannot make a simple comparison between civilian society and the armed forces, but identifiable shortcomings will have repercussions in the behaviour of service personnel. It is to their credit that they have been able to put up with increasingly intolerable conditions, but many of them arc voting with their feet and leaving the forces in great numbers. Neither the security of the country nor the general morale of the forces can afford that.
We have seen other examples of the breakdown of morale. It is a matter of regret that, over the past 12 months, there has been an increase——

Sir Antony Buck: Does the hon. Gentleman not think that he is exaggerating beyond a peradventure when he talks about a breakdown in morale? If he is in day-to-day contact with our armed forces, as many Conservative Members are, he will know that to talk in such terms is a gross exaggeration. There are matters of concern, but to talk about a breakdown is a gross exaggeration. I ask the hon. Gentleman to withdraw his comments.

Mr. O'Neill: I was not aware that I was over-egging the pudding. I was merely saying that we ignore at our peril the increasing difficulties confronting our armed forces as a result of the Government's indifference. That is evidenced by the steady stream of well-trained personnel who are leaving the services—and leaving at great cost to this country.
There have been reports of five cases of bullying and malpractice at training establishments that have resulted in fatalities. I know that at least one case is still sub judice and that it would therefore be inappropriate for us to discuss it in detail. However, the Under-Secretary must reconsider his refusal to hold a broader inquiry into those unfortunate and tragic incidents.
We must examine carefully the problems with our junior soldiers. We cannot forget that junior soldiers are minors and that the armed forces are, in effect, in loco parentis in respect of them. They have a responsibility that far exceeds their responsibility for older soldiers. The Minister should address himself to that point, because it is a consequence of the fact that the regulations have not been adhered to as we would have wished.
The problems of training establishments and the treatment of young soldiers have been highlighted in a variety of ways, and in one case there were allegations of racial abuse. The Government must reconsider their refusal to introduce some form of ethnic monitoring. I know that Alf Dubs, the former Member for Battersea, whose absence from the House many of us greatly regret, and my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) pursued the problem with great vigour. The stories that we have heard do not satisfy us and we believe that it is incumbent upon the Minister to re-examine the desirability of introducing ethnic monitoring and preventing racial abuse in the armed forces.
The Opposition never have a three-line Whip in debates on capital punishment. It is never a matter of party division. It is up to individuals and their consciences. We know that over the years debates on capital punishment have never been a source of great satisfaction to the Prime Minister. It is only right that we should re-examine the retention of the death penalty in the regulations and consider whether we should move away from the use of that penalty in times of peace.
Last year the Select Committee on the Armed Forces Bill recommended that Queen's Regulations in respect of courts martial should be reviewed, with particular regard to the rights of service men and women in the Army and RAF to be represented at summary proceedings by an accused's friend, to use the naval jargon. Will the Minister tell us what is happening about that and whether the Government have agreed to support the recommendations of the Committee?
The Opposition do not believe that the present court martial system is the best that our services could have. We believe that the defendant service man at a court martial should have the right to be defended by a senior NCO, if the defendant thinks it appropriate. The use of an NCO's services might well afford the court the opportunity to hear someone with more direct experience of the life of the other ranks than can be provided by a comissioned officer. This is a delicate point in some respects, but it might be an appropriate matter for consideration. I realise that it would be difficult to ensure that NCOs were given legal training, but the Minister should consider whether some NCOs could be utilised in that way.
We acknowledge the work of the services in dealing with drug abuse. We recognise that sterling efforts have been made, especially in educating service people about the hazards of drug and alcohol abuse. I understand that the Army is to subject soldiers to routine drug tests. A

number of pieces of special equipment have been ordered. Will that equipment be purchased for the RAF and the Navy as well? Has the Army carried out any tests? What are the results? These are important matters. If the Army is still breaking in the equipment or getting the bugs out of the system we would be happy about that, but we would like assurances that if the equipment is worthwhile—we believe that it is—and is successfully applied by the Army, it will be extended to the other services. We congratulate the Royal Navy's alcohol abuse team on its excellent work. We hope that the other services will set up similar specialist units. Alcohol abuse is a major problem in our society. In some instances, young men who have reasonable amounts to spend on alcohol will do so, to their disadvantage.
I mentioned that the Campaign for Homosexual Equality was not allowed to give oral evidence to the Select Committee. Due recognition ought to be given to the increasing self-confidence of homosexuals in being able to come out and live an open life, rather than the closed life that many lived in the past. It would be desirable for the Government to take account of changing social attitudes and again consider the issue of homosexuality in the armed forces.

Mr. John Wilkinson (Ruislip-Northwood): Does the hon. Gentleman agree that he is making a thoroughly irresponsible suggestion from the point of view of military discipline? It would be fatal to be more permissive towards homosexual behaviour within the closed confines of military units, ships at sea, and so on, especially in view of the AIDS epidemic. That is one of the most ludicrous and dangerous suggestions that I have ever heard.

Mr. O'Neill: That shows that there is a genuine difference of opinion. We take the view that homosexuality exists and that it should not be a source of blackmail. It should not necessarily be a threat to military discipline. I understand the hon. Gentleman's point, but other armed forces do not take the same view and it does not seem to have a deleterious effect on discipline.
The issue of AIDS has already been raised and I should like to ask the Minister about the fate of those service personnel who are identified as being HIV positive: will they be discharged, or will they be allowed to remain in the service as happens in the United States Navy? Perhaps the Minister will advise us of current thinking on this subject, because it is clear that in the Western Alliance there are differences of emphasis and attitude. I do now want to labour the point, but it is important that we use a debate such as this, which is not a heated debate, to consider the regulations dispassionately. I should like to know the Minister's attitude on this issue.
Last year there were extensive discussions, long debates and a serious examination of these regulations by the Select Committee, as happens in the quinquennial review. An order that affords only 90 minutes for debate must, of necessity, be superficial in some respects, but in other respects this is an opportunity for us to obtain an update from the Minister about current thinking in the Ministry and the services. Therefore, I should be grateful if the Minister would address himself to the points that we have raised during the past 12 months, because they have been raised on previous occasions, and some of our arguments have been reinforced by unfortunate and tragic experiences. We ask the Minister to take account of that.


We shall not seek to divide the House on this order, although perhaps some of the new Conservative Members had not appreciated that point, and that is why they are here.
We recognise the high standards of our forces and we wish to ensure that those high standards of behaviour continue. We recognise that we demand a loss of civil liberties from our voluntary forces so that our civil liberties and freedom can be maintained and protected. Therefore, we take our responsibilities in this area extremely seriously and carefully. That is why the points that I have raised this evening merit consideration and response from the Minister and the House. We hope that tonight the Minister will give satisfactory answers to some of the points on which he has not given satisfactory answers in the past.

Mr. John Wilkinson (Ruislip-Northwood): This renewal debate on the Army, Air Force and Naval Discipline Acts provides a useful opportunity to raise specific matters of importance to the discipline of the armed forces. I want to touch on one issue which, from a disciplinary point of view, could be of considerable significance, especially to the Royal Air Force. I have addressed this issue before, but to my knowledge it has not been satisfactorily answered.
The Government possess powers to requisition, in time of emergency or war, civilian assets and to take them up from trade. That includes not only ships but civil aircraft that belong to airlines and civil air transport operators. Of course, crews are needed to operate those airplanes. One can imagine a situation in which civil crews would come under military command to fulfil ostensibly civil roles but roles that could, in time of emergency, bring hazard and danger to the operating air crews. One can also imagine that the British Air Line Pilots Association, or other unions, or even the individuals themselves, might be reluctant to fly their aircraft into what they regard as a war zone.
I suggest that Her Majesty's Government should have powers to make civilian aircrews who are flying civilian aircraft such as air transport airplanes, airliners that are converted to flight refuelling, civil helicopters for air transport and air-sea rescue and perhaps other aircraft, such as surveillance airplanes used in peace time for policing the United Kingdom's economic zones, such as fishing zones, that are operated in peacetime under the aegis of the Department of Trade and Industry, but which in case of war, would be required for maritime patrol, come under military commanders.
Civilian personnel whose primary job is flying for an airline or some other duty can be members of the Royal Air Force volunteer reserve and, as such, fly regularly with the Royal Air Force on air transport and maritime patrol duties, as well as carrying out flying instruction and air experience duties. But civilians who do not belong to the volunteer reserve or the Royal Auxiliary Air Force could, in an emergency or war, be required to carry out difficult and dangerous operations. In those circumstances, it is essential that they be subject to military discipline under the Air Force Act 1955. If the Government have not already done so, I hope that they will make provision for this, because it could have considerable operational significance.

Mr. Tam Dalyell: I want to ask the Minister one question, which I hope he will take in the spirit in which it is asked. In a rather careful and unemotional spirit. I have to say to him that, for three and a half hours earlier in the year, starting from a basis of scepticism, I saw Colin Wallace and Fred Holroyd. The truth of the matter is that I do not know one way or the other what happened or what did not happen in the case of Captain Nairac. I know that, in certain other matters, what Colin Wallace has claimed is suspiciously near the truth in relation to Lord Glenamara and in relation to what happened in the 1970s of which I have personal knowledge——

Mr. Tony Marlow: On a point of order, Mr. Deputy Speaker. I understood that we were debating the Army, Air Force and Naval Discipline Acts. We know that the hon. Member for Linlithgow (Mr. Dalyell) likes to bang on about all sorts of things which have nothing to do with the business, but the House will be very grateful that you are in the Chair and are well able to control the hon. Gentleman should he stray out of line.

Mr. Deputy Speaker: I am listening carefully to the hon. Gentleman, who has only just started his speech. Perhaps it would be helpful if I reminded the House that we are discussing the terms of service, discipline and punishment in the armed services.

Mr. Dalyell: This is very much a question of discipline. Even if the hon. Member for Northampton, North (Mr. Marlow) thinks that I am raising matters in a provocative way, I hope that other Conservative Members will not. I am asking a serious question.
A great deal has been written about this. A serious forensic scientist, Dr. Julius Grant, has apparently confirmed the dates of a number of the dairies that many of us have seen. We are talking about people who have been endlessly trying to approach Ministers. All that I say, in as quiet and careful a way as I can, is that, being a person of some scepticism and very great care in dealing with people, I came to the conclusion — I have been extremely careful about it—that much of what Colin Wallace and Fred Holroyd were saying certainly needed investigation. I want to say this in as unvituperative a manner as possible: this position should no longer be allowed to fester. I plead with the Ministry of Defence at least to take the matter seriously. It is not quite good enough, after all that has happened, simply to say that there will be no inquiry. Ministers cannot go on saying, "We will do nothing about it; we will ignore it." All these matters are gaining more and more credence.
I sit down now, because I promised that I would speak for only two minutes, with a plea that the Ministry of Defence, along with other Departments, takes seriously these allegations from Colin Wallace and Fred Holroyd, who were trusted at the time—they are not of my political beliefs — and who occupied very important positions, in the case of Colin Wallace. Those who served with him bear witness to his importance in Northern Ireland.

Mr. Marlow: On a point of order, Mr. Deputy Speaker. It is patent that the hon. Member for Linlithgow (Mr. Dalyell) is banging on about something that is totally


unrelated to the business in hand. The hon. Gentleman is always doing this. Will you please defend the House from this abuse?

Mr. Deputy Speaker: The hon. Member for Linlithgow has assured me that he is on his last sentence.

Mr. Dalyell: This is a matter of military discipline, and concerns something that happened in Northern Ireland in the mid-1970s. It is essential to military discipline. There should be some investigation.

Sir Antony Buck: I hope that the hon. Member for Linlithgow (Mr. Dalyell) will forgive me if I do not take up his argument. I fail to see its relevance to what we are considering.
It is right that we should have a regular review of matters relating to the Army, Air Force and Navy and discipline and morale in those services. One of the particularly good things about the House is that we have regular single service debates. From time to time we also review Army, Air Force and Navy discipline.
It is appropriate that I should say a few words—the House will be relieved that it will be a few words—about one of the principal instruments of maintaining discipline, the military corrective training centre, which is housed in Colchester. I am blessedly relieved to say that it is now in the last stages of the completion of its rebuild. I hope that the Minister can give us an update about that development. Certain parts of the rebuild are functioning now, but we hope that there will be a grand opening of the entire centre shortly. It would be fun to have the Minister, his colleagues and other dignitaries visiting the constituency for that opening.
For the 26 years that I have been in the House I have battled for the opening of a new military corrective training centre. Until last year, most of that centre was housed in Nissen huts.

Mr. D. N. Campbell-Savours: The hon. Gentleman was the Minister once.

Sir Antony Buck: Exactly. I started campaigning then for the centre and that campaign has been very effective. From time to time, even Opposition Members have been helpful. I am glad to say that the campaign has come to fruition and I hope that before long there will be a grand opening of the MCTC. In fact, when the Labour party was in power there was little progress towards that goal, but I shall not make party political points about matters that are, on the whole, best kept out of the political arena.
This debate gives us an opportunity to say a brief word about morale in the armed forces. I represent part of a garrison town and I have an opportunity to visit the armed forces. Indeed, many hon. Members visit the armed forces and we should take every opportunity to pay tribute to the high morale and expertise in the armed forces. Such professionalism is evident whether one visits the armed forces in the Falkland Islands, the British Army of the Rhine, in Belize or elsewhere.
What is the present state of affairs regarding premature voluntary release? If the figures are increasing, we should hear about that. When we came to power the situation was desperate. The middle ranks of the armed forces, the senior NCOs and junior officers, were taking premature

voluntary release in formidable numbers. The most skilled of our armed forces were draining away. The first thing that the Government did was to deal with the pay of the armed forces. That had an instant, dramatic effect on the outflow of personnel from the armed forces.
My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) referred to skilled pilots. My hon. Friend is well aware that when the RAF trains a pilot he becomes an expert and is a valuable commodity on the commercial market. That pilot, as a chief pilot in the civilian air force or as an employee of the air authorities can earn large sums of money.
I hope that the Minister can give us an update about premature voluntary release. We must ensure that it does not occur to an alarming extent. Of course, people should be able to go into civilian life with the advantage of armed forces training. However, some of us have heard suggested that the figures for premature voluntary release are increasing. If so, that is a matter of considerable concern.
It is right that the House should take this opportunity to pay tribute to the armed forces of the Crown, particularly in the context of the burden borne in Northern Ireland. No armed forces but ours could have sustained that burden for such a long period. Having visited Northern Ireland 14 times since the troubles began—I am not unduly superstitious when I say that I was glad when the 13th visit was over—I know that high morale has been maintained. The House should take every opportunity to pay tribute to what our armed forces are doing throughout the world, but particularly in Northern Ireland. Discipline, with which we are particularly concerned tonight, is standing up to the strains imposed on them there just as much now as it has in the past.

Ms. Joan Ruddock: Anyone with any experience of military matters or who has given any thought to them will recognise the need for discipline in the armed forces, both for military effectiveness and civilian safety.
Yet instilling in men the discipline to kill when required to do so in war and at the same time to behave in a civilised manner in peace time is no simple matter. That is why the Acts to which these continuation orders apply contain sections dealing with disgraceful and disorderly conduct.
Part II of the Air Force Act 1955 contains section 43A which prescribes penalties for
Any person subject to air-force law who, without reasonable excuse … uses threatening, abusive, insulting or provocative words or behaviour likely to cause a disturbance".
It is my belief that at the RAF base at Upper Heyford discipline has fallen far short of acceptable standards and the sort of behaviour to which that section applies. I doubt whether disciplinary action has been taken in this case, and I wish to bring it to the Minister's attention.
At first sight my complaint may seem to be trivial, because it relates to material that is on sale at that base, including stickers and a song book. But this is a serious matter. The stickers depicted an F-111 and carried the slogan "Warsaw pact central heating" — [Laughter.] I do not find that funny.
Although the song book consisted of 52 pages, it contained but one verse that I can recite in the Chamber without Mr. Speaker ordering me out. I shall recite that verse because the book was on sale at an open family day at a British base. It stated:


Phantom flyers in the sky,
Persian-pukes prepare to die,
Rolling in with snake and nape,
Allah creates but we cremate.
North of Tehran, we did go,
When the FAC said from below,
'Hit my smoke, and you will find,
The Arabs there are in a bind'.
I rolled in at a thousand feet,
I saw those bastards, heating feet,
No more they'll pillage, kill and rape,
`Cause we fried 'em, with our nape".
That would be extremely serious in any circumstances, but given the bombing that took place from this country on Libya, and given the position of the United States in the Gulf area at present, this is indeed insulting and provocative behaviour.

Mr. Wilkinson: On a point of order, Mr. Deputy Speaker. Are not we discussing the Royal Air Force Act 1955, not the United States Air Force services?

Mr. Deputy Speaker: It would he better if the House left matters of order to me.

Ms. Ruddock: Thank you, Mr. Deputy Speaker. I am sure the hon. Gentleman knows that the base has an RAF commander in charge of it; I have a letter from him; he exists.
I hope that the Minister will agree that the fact that the material has been produced and put on sale——

Mr. Marlow: I am not trying to be critical. By way of explanation, will the hon. Lady tell the House whether the verse that she read out was written by British service men or United States service men?

Ms. Ruddock: I am happy to tell the House, as I have been doing, that that material was on public sale at an open day at RAF Upper Heyford, where a British commander is in charge. If the hon. Gentleman will allow me to continue, I want to tell the Minister that I hope that he agrees that the fact that that material was produced—albeit, I suspect, by American service men—and was put on sale—[Interruption.] I am sure that it has a lot to do with us. It happened on a British base. The material was steeped in racial hatred and sexual violence, and should not have been on sale at such a function.
I wonder whether the Minister believes that, in order to discipline men for working with nuclear weapons, the cultural values of violent obscenities must be employed; and whether the spread of such values among the armed forces—British or American—in this country is good or bad for discipline.
I do not need to remind the House that there are nuclear weapons on that base that can bring about the total destruction of this nation, and every other. Such behaviour is not conducive to the special discipline that is required when one is in charge of nuclear weapons. I ask the Minister to hold an inquiry into the matter and report to the House.

Mr. Derek Conway: I hope that the House will forgive me if I return to the subject raised by my hon. Friend the Minister on opening the debate—that of service discipline and the welfare of British, and not American, troops. I hope that I can emulate my hon. Friend's brevity in opening the debate.
If the British Army were given the opportunity to debate all the gossip and niggles that come out of the

Members' Tea Room I suspect that the debate might last much longer than tonight's may last. In this debate we are hearing many of the niggles that hon. Members will undoubtedly hear if they ever visit a unit. They are part of ordinary life. Hon. Members may hear echoes of those sorts of niggles during next week's debate on Members' pay, and they will hear them when they visit the services.
I have a great regard for the hon. Member for Clackmannan (Mr. O'Neill). Those of us who have seen him perform in the past have come to like him. However, to go on about the capital punishment aspect of discipline in the armed forces when debating this order is not on. If the hon. Gentleman can tell me when that was last used I shall happily give—with your permission, Mr. Deputy Speaker, as I would he gambling in the Chamber—£5 to the Army benevolent fund. However, it is not a matter of the greatest import, either to the Army or the House.

Mr. O'Neill: rose——

Mr. Conway: I think I may have just lost £5.

Mr. O'Neill: I do not want to rise to the bait, but I want to tell the hon. Gentleman that if a punishment is not used, and is seen not to be effective—I do not believe we should have an arid discussion about its deterrent value now—we would be well advised to rid ourselves of it and remove it from the legislation. The House has shown that it is opposed to all aspects of capital punishment. We believe, therefore, that it would be appropriate to delete it from the regulations.

Mr. Conway: The hon. Gentleman has not earned his £5 for the Army benevolent fund. It is one thing for Back Benchers—we lesser mortals—to nitpick, but we expect better things from the Opposition Front Bench.
One of the issues to which the hon. Member for Clackmannan rightly referred — some of us have contemporaries who are still serving — is that of premature retirement from the armed forces. The hon. Gentleman would do well to remember that during his party's term of government there was a much greater problem than there is now, when there has been a considerable improvement in pay and conditions for the armed forces.
Having crawled a little, I may incur my hon. Friend's wrath when I suggest that in considering welfare and discipline in our armed forces we should perhaps move forward a little with the times and appreciate that while, in civilian life, many people have working wives or partners, those who govern our armed forces have not quite come to terms with that concept. I understand that in many cases where people seek to leave the armed forces prematurely much of the pressure comes from spouses who may have to give up highly lucrative employment for the sake of their spouses' careers. Politicians perhaps do not realise how many wives sacrifice a great deal to enable their husbands to move on every two or three years as their postings demand.

Ms. Clare Short: I recently received a letter from a couple in which the wife had been a nurse in the armed forces for seven or eight years. The couple had married fairly recently and she had become pregnant. It was unplanned, but they liked the idea of having a baby. However, it meant that she would be forced to give up her career. The husband wrote to me a very upsetting letter saying that they were considering an


abortion because they had to choose between the wife's career in the armed forces or the baby. Does the hon. Gentleman agree that that is an outrageous condition of service which ought to be changed?

Mr. Conway: In view of the sparsity of Members on the Opposition Benches, the hon. Lady will have ample opportunity to make her own contribution to the debate. If she is asking whether I, as a convert to the Church of Rome, consider such a position outrageous, the answer is yes. Those of us blessed with children do not regard it as an unplanned curse and I am sorry if the hon. Lady sees it in that light.

Ms. Short: That is not what I said.

Mr. Conway: Returning to my hon. Friend the Minister's opening remarks, I understand that the Army Act 1955, although it does not specifically say so, in fact covers those who serve in the Territorial Army. My hon. Friend is always very generous in bearing with me when I prattle on at length about the Territorial Army, but as it is a growing part of our armed forces' commitment I ask that when he comes to review the terms of the 1955 Act and of the order in view of the heavy recruitment to the Territorial Army and the Government's handsome and encouraging plans for it, he should consider that we are perhaps approaching the time when we should look rather more closely at the way in which the conditions of service apply to those signing up for a Territorial Army commitment. Young men joining infantry regiments are given a very good grounding about their military commitments before they actually sign on the dotted line and from the taxpayers' point of view once they have actually signed we perhaps need the Act to cover that commitment a little more forcefully than at present. As we encourage and expand the Territorial Army we should perhaps likewise ensure that from the taxpayers' point of view that commitment has meaning for those seeking to leave early.
Finally, like many hon. Members I was concerned to read this week that the regimental system which has been the pride of the British Army may be under review. Many of us deeply regretted the abolition of many county regiments under the Labour Government. That was most unwelcome in many parts of the country. I put it to my hon. Friend the Minister that such a proposal would be heavily resisted by many hon. Members because the regimental system undoubtedly plays a major part in the disciplinary aspects as well as the welfare aspects of service in our armed forces

Mr. Marlow: My hon. Friend makes an interesting point about the regimental system in terms of discipline, prestige, morale and so on, but there are other armies—perhaps not quite so good as ours—elsewhere in the world which have not had such a system but have nevertheless been highly efficient. Moreover, one of the disadvantages of the regimental system is a tendency towards hidebound attitudes so that when changes in tactics and strategy are required it may be a dead hand on progress, which should quite properly be re-examined.

Mr. Conway: I cannot agree with my hon. Friend. He makes a suggestion to a Geordie who very much misses the Northumberland Fusiliers—now the Royal Regiment of

Fusiliers—and who is the Member for Parliament for a constituency where the King's Shropshire Light Infantry had a proud county record, but which was abolished by the Labour party. My hon. Friend should discuss with our American allies whether the lack of a regimental system has made their fighting troops more efficient. I suggest that the reverse is the case and that that is why they are moving towards a cohort system to try to instil the notion of family, which is an essential part of training, discipline and welfare.
I have taken longer than I expected. but I hope that my hon. Friend the Minister will ensure that the regimental system remains a fundamental. if not a legislative, part of the discipline of our armed forces.

Mr. D. N. Campbell-Savours: This debate gives me an opportunity to comment on the Air Force Act 1955, which has 224 sections, three of which deal with a matter of great concern to me and which should be of great concern to the Minister.
I refer to flying and offences related to flying in sections 49, 51 and 52. They provide:
49. Any person subject to air-force law who is guilty of any act or neglect in flying, or in the use of any aircraft or in relation to any aircraft or aircraft material, which causes or is likely to cause loss of life or bodily injury to any person shall, on conviction by court-martial …
51. Any person subject air-force law who, being the pilot of one of Her Majesty's aircraft, flies it at a height less than such height as may be provided by any regulations …shall, on conviction by court-martial …
52. Any person subject to air-force law who, being the pilot of one of Her Majesty's aircraft, flies it so as to cause, or to be likely to cause, unnecessary annoyance to any person shall on conviction by court-martial …
Those sections are not being implemented, and the Minister knows it. From his own replies, we know that there have been 34,000 complaints about low-flying aircraft in the United Kingdom in the period 1979–86, but there has been only one court-martial. Two pilots have been fined and five have been summarily disciplined, or received a smack on the hand.
I want tonight to use Parliament for what it was meant for — I want to read into the record some of the interesting correspondence that I have received from my constituents and constituents of other Members, some Conservative, who are present. I received a letter from a person in the county of Cumbria on 6 May who said:
Somebody has to call a halt. Last Thursday, May 1st at 4.45 p.m. one of your low flying aircraft missed our weather-cock by a few feet. It is thirty feet above the ground and I was twenty yards away. The 'plane then made a terrific swerve to avoid going through an ash tree and passed it seventy feet up, well below the top of the tree. Thirty yards east of the weather-cock were twenty in-calf cows and heifers, which the craft went over and to my horror they all went beserk, as did 36 other cattle twenty odd yards to the south, some of which jumped a barbed wire fence and broke the side of a ditch which had just been cleaned out. Two days before this, i.e. April 29th, five aircraft screamed over these premises between 9 p.m. and 11 p.m. the fifth one at exactly 11 p.m.
The constituent—not mine—then provides an ordnance survey reference. The Minister will be pleased to know that I have sent him this information and asked for an investigation. As is always the case, the investigation will turn out to be a farce and nothing will be done, but we can still go through the motions because the Minister demands it, as do the public, it seems.
I have another letter from someone in the county of Cumbria which runs:


As residents of Buttermere Valley, we are constantly annoyed and on occasions frightened, by the low flying of military aircraft, some of which are so low that we are able to see the pilot in the cockpit. One incident in early August 1985, prompted me to write a strong letter of protest to MOD (Air). We run a small guest house and on that occasion we had in residence a lady who was suffering from an advanced stage of Parkinson's Disease. The aircraft banked over the house at very low level, frightening the whole household and stampeding neighbouring livestock and reducing our guest to a state of shock and collapse. In my letter to MOD (Air) I forewarned of possible future tragedy not only to RAF personnel but possibly to to residents of the valley also. Of course I received the expected bland reply …
Wednesday's fatal accident was a tragedy for the unfortunate pilot's family but could have been a disaster with Keswick only a few seconds flying time from the scene of the crash!
Until now I have never felt the need to write to my Member of Parliament but I feel so strongly on this point. Can nothing be done to at least reduce this constant low flying in this area?
I estimate that I have probably received about 800 letters on the subject over the past few years, but I have received a particularly large number during the last month, following this most recent accident in my constituency. A letter that I received from someone living near Leeds tells me:
My wife and I and a number of friends have struck the Lakes off our holiday list because of the incessant noise and the bedlam caused by training aircraft. We actually came across some overseas tourists who were amazed that HM Government allows the desecration of such a jewel of landscape.
An infuriated United States holidaymaker says:
How thick are these guys who allow the destruction through noise of one of Europe's brightest holiday places? Your Wordsworth is surely turning with shaky fingers in his ears.
I have received many letters from tourists complaining about what is going on in the Lake District and, indeed, in other parts of the country. I have a very curious mailbag from people in Devon and Cornwall, who complain about the failure of their Conservative Members of Parliament to take such matters seriously. When they receive replies from Ministers saying that nothing is wrong — that everything is OK, and that such things are to be accepted—they cannot understand why their own Members of Parliament do not object. I see an hon. Member in the House tonight whose constituents have written to me on a number of occasions objecting to the fact that he has failed to deal with such complaints, and the fact that pilots who should have been disciplined have not been so disciplined.

Mr. Marlow: Name him.

Mr. Campbell-Savours: The hon. Gentleman should not ask me to name people in the Chamber. He will know the difficulties that I have had on previous occasions when I have set out to do that—although perhaps for other reasons.
I have another letter here, which reads:
On Tuesday 16 June, my wife and I were travelling from Ambleside to Silloth.
That crosses two Conservative constituencies in the county of Cumbria.
At about 4 pm my wife saw a war plane travelling north over Thirlmere. The road, of course, is higher than the water level and the plane appeared to be on a level with us. The following noise was so horrendous that I instinctively ducked and my car swerved across the road. Fortunately the road was empty and I immediately regained control. However a serious accident or even a fatality could have occurred. As you will

observe I live in Silloth and continually these plans tear across the sky at very low height causing much distress to elderly people by the terrible noise emitted.
This has been going on for a long time.
Hon. Members may mumble about how monotonous these letters are, but there are hundreds of them. Indeed across the House there must be tens of thousands. I only wish that hon. Members would bring them to the Chamber so that the Minister could learn what is happening. He sends junior aircraft men out to the provinces to lecture people and give them the old PR rubbish to justify what is happening, and never learns the truth. While people accept the need for low flying, they object strenuously when certain areas of the country are singled out for what I describe as special treatment, and the people of those areas are abused by joyriding pilots who are carrying out far more sorties than is necessary. I have many more of those letters but perhaps I will have time to come back to them later in the debate.
Five issues arise from what I have drawn to the attention of the House. The first is the loss of life of pilots. I tabled a question that was answered on Monday 29 June. I asked the Minister to tell me how many pilots had been lost in such accidents. He refused to do so. His reply referred me to some obscure document. He was unwilling to publish in Hansard the names of those pilots who have died in the service of their country. He was unwilling to name or identify by number those pilots who have died in the service of their country over the past eight years. That is shameful. The answer is clear and, just in case Conservative Members do not believe me, they should refer themselves to the reply on Monday 29 June.
The second issue is that of the loss of aircraft and the vast amount of public expenditure involved. According to Government replies given to me and other hon. Members over the past two years, just taking Tornado and Jaguar aircraft into account, there have been 172 accidents involving £1,500 million worth of equipment since 1976. In the period 1983–87 12 Tornado aircraft were lost at a loss to the Exchequer of £216 million. In the years 1975–87, 49 Jaguar aircraft were lost at a cost of £300 million to the Exchequer. That makes a total of £516 million. A total of 18 Hawk aircraft were lost in the period 1982–85. Eight United States F111 bombers were lost in the period 1981–84. I cannot imagine what happened before 1981 or after 1984. We do not have those figures. Those figures may well be doubled. In the period 1980–85 39 helicopters were lost. We are talking about an aircraft loss in excess of 140 compared to the 34 aircraft lost in the Falklands war. That is the measure of loss arising from air——

Mr. Wilkinson: On a point of order, Mr. Deputy Speaker. What proof does the hon. Gentleman have that any of those losses were attributable to ill-discipline? Unless he can make it clear that that is the case he is, in my judgment, out of order.

Mr. Deputy Speaker: That is a point of argument, not a point of order for me.

Mr. Campbell-Savours: I shall give the hon. Gentleman the answer. Instead of intervening, perhaps the hon. Gentleman could disappear to his office or the Library and read all the reports that have been published and the newspaper articles that have been printed following the loss of those aircraft. He will then be able to judge for himself whether they relate to neglect by pilots. It is


difficult for any of us to make the judgment but I have drawn conclusions and I am sure that he would wish to do so. The Minister does not deny it. He has every opportunity to come to the Dispatch Box now and dispute my figures, but he will not do so. I put it to the Minister that we have, perhaps, lost as many as 250 aircraft in the period 1976–87. Perhaps the Minister would care to come to the Dispatch Box and deny that. I do not have the total figure but it has been estimated to be as high as that. Is that the wrong figure? If that is not wrong, I put it to Conservative Members that they should multiply that by the millions of pounds that the aircraft cost and consider that as a global figure in terms of public expenditure as against other areas of the defence budget.

Mr. Andrew Rowe(Mid-Kent): rose——

Mr. Campbell-Savours: I will not give way because I have very little time left.
We are talking about a vast amount of money. It is significant that every time there is a low-flying aircraft disaster in the United Kingdom, instead of the Government referring to the cost to the Exchequer and the damage that the loss does to the defence estate, they hide behind commiserations about the loss of pilots. When I ask a question about it I do not get a clear answer. When statements are made by the Ministry of Defence, they are always commiserations for the pilot and there are never any references to the public expenditure that is lost when an aircraft is involved in an accident.

Sir Antony Buck: It is the pilots who count.

Mr. Campbell-Savours: Perhaps they should be the priority. If they are the priority, the Ministry should have replied to the question that I tabled last week. However, it has not been replied to. I was asked to refer to another document.
The third issue is the whole question of the potential damage to communities. I have dealt with that to some extent in the letters that I read. The majority of the people in my constituency are concerned about what is happening. Many people blindly support low-flying aircraft sorties over the Lake District, but many people right across the political spectrum ring me at home or write to me to tell me that they object. They maintain that it has gone too far. I predicted, to within a quarter of a mile, where the last disaster occurred in the Borrowdale valley. That involved two aircraft, the loss of one life and a cost to the Ministry of Defence of over £25 million worth of equipment. That disaster has shaken my constituency. The Minister has a duty to consider that and to consider introducing at least a temporary ban to allow a proper review to take place.
When the Minister says that he is carrying out a review that is only part of the continuing review that he referred to in a reply that he gave me the other day when he said:
The regulations governing the low-flying system are kept continuously under review and altered as necessary."—[Official Report, 6 July 1987; Vol. 119, c. 60.]
That is the review that the junior aircraftman that he sent to Penrith the other week was talking about during that audience. It may have pleased some at that meeting when the Minister spoke about a review, but he did not tell them that it was a part of the review which is going on all the time and which is meaningless.
When we went to his office, we were told that there was a permanent review. But that review leads us nowhere because no action is taken and no initiatives are taken. People in the county are not listened to. Complaints are coming in from all over the country, mainly from Tory constituencies because it is mainly the Tories who represent rural areas. But those complaints are ignored. Tory Members are treating those representations with contempt. Last year I rang a Tory Member who is no longer here and mentioned this subject. However, his secretary came on the phone and argued with me suggesting that I had no right to contact him because it was all perfectly proper and that those matters were beyond contention. Such is the blind indifference of many Members in the House to what is going on.
The existing practice of low-flying aircraft is a danger to tourism in the county of Cumbria, in Devon and Cornwall, and in central Wales. If the hon. Gentlemen who represent those constituencies were true to themselves, they would admit that. It also has damaging effects on the health of the elderly and the infirm, as they are often greatly distressed when aircraft fly in close proximity to buildings.
The fourth issue is the whole question of whether the training is necessary. The Minister might take note of these figures that he has given to hon. Members over the past few years. There are now 4,751 pilots in all three services, and 3,426 in the RAF are trained. According to the Minister's replies to parliamentary questions, only a few pilots leave the services within five years of completing their training. Last year only six left within that period. There is a high retention rate, which means that there is a lesser requirement for pilots to be permanently under training than if the position were otherwise. Who is deciding the requirements? Is there joyriding going on? In other words, is unnecessary training taking place?
Let us consider the figures. In 1978, there were 4,384 pilots plus Royal Navy pilots. At that stage it was impossible to define who was trained and who was not. According to the Minister's figures, there were about 4,700 pilots in 1978 and they were flying 76,000 sorties annually. Those are the Minister's figures. Eight years later in 1986, we had 4,751 pilots—only 51 more than in 1978, so effectively there was the same number of pilots—yet the number of sorties increased from 76,000 to 151,000. In other words, the number doubled. Are we saying that pilots in 1978 were untrained and that now—[Interruption.] We fought a war in the south Atlantic with those pilots so I presume that they were trained. The Labour Government had not been long out of power when the Prime Minister led us into that conflict.

Mr. Keith Speed: Will the hon. Gentleman give way?

Mr. Campbell-Savours: No. I have no intention of giving way.

Mr. Speed: Will the hon. Gentleman give way?

Mr. Campbell-Savours: The number of sorties has doubled yet the number of pilots has remained constant, and I want to know why our pilots are doing so much extra training.

Mr. Speed: rose——

Mr. Campbell-Savours: The answer is clear——

Mr. Speed: rose——

Mr. Deputy Speaker: Order. The hon. Member for Workington (Mr. Campbell-Savours) has been in order until fairly recently but he is now straying into training, which does not relate to the order. Terms of service and discipline can be raised under the order but not training. The hon. Gentleman must confine himself to the order.

Mr. Campbell-Savours: Thank you, Mr. Deputy Speaker, for bringing me to order and bringing to an end the interjections of Conservative Members.
The fifth issue is monitoring equipment, which would help us to identify those who are breaking the code that has been so carefully set out under the Act that identifies the nature of disciplinary offences. Monitoring equipment exists. Indeed, it was identified in the Daily Mirror of Saturday 8 January 1986. The article read:
Nicked for speeding at 600 mph.
Police trap pilot.
By Dennis Newson.
An RAF jet pilot has been booked for speeding."—
I am sure that you will understand, Mr. Deputy Speaker, that this is a disciplinary offence—
He was clocked doing nearly 600 mph in his Harrier jump jet.
The pilot was caught in a new type of police radar trap specially developed for aircraft. A £2 million camera followed him as he flew over Marsberg, West Germany. Now he has been reported to his CO for speeding over a built-up area where the limit is 480 mph. He is also in trouble for flying too low—under 500 feet.
When I read that article I thought that we should have a peep at the equipment. The article continues:
The super radar — Skyguard — was built after complaints from West Germans that the noise from low-flying aircraft was smashing windows and waking babies.
Major Klaus Petersen, who operates the camera with a six-man crew, said yesterday: 'The British pilot was caught red-handed.'
I wrote to the Ministry on 6 March, 1986 and I received a reply from the Minister of State, Lord Trefgarne. He wrote:
As you know, from time to time we conduct covert surveys of low-flying activity taking place in the UK.
I wonder what that means. I presume that a man stands on Penrith railway station looking in the sky and estimating the speed of aircraft. I presume that it is something like that. The letter continues:
These surveys confirm that there is a healthy respect for the UK low-flying regulations.
If someone were standing on Penrith station and carrying out a visual observation that is exactly the conclusion to which he would come. The next passage of the Minister's letter reads:
very few breaches, accidental or otherwise, are observed. Against this, we must carefully consider the cost of deploying sophisticated equipment of the kind you mention.
We are talking about £2 million. So in Germany they can have equipment which costs £2 million for chasing people who break the rules, but in Britain we are not allowed to have that kind of equipment. We are willing to put up with a vast loss of public expenditure as people gallivant across the fells of the Lake District, breaking the rules and generally joyriding and costing the Exchequer a lot of money, but we are not allowed to have the £2 million cameras that would catch them doing it, which would then enable us to exercise those sections in the Act, which would ensure that they are fully disciplined. Indeed, we might then increase the number of courts-martial from one out of 34,000 complaints in 10 years to many more. But the

Minister does not seem to want to do that. I say to the Minister that my constituents want that equipment to be installed. He has a duty to install it. [AN HON. MEMBER: "He may not agree with the hon. Gentleman."] He may not agree with me because he wishes to turn a blind eye. That is why I raise the issue tonight. I object to Ministers turning a blind eye, which brings me to my last point of issue. That is, the indifference of Ministers to these matters.
The truth is that Ministers just do not recognise the anger of people living in the Lake District, in central Wales, Shropshire, or in the borders of Scotland. There are hon. Members from the borders, and I invite them to intervene. I should welcome an intervention from a Borders hon. Member.

Sir Hector Monro: I do not know when the hon. Gentleman last gave way in a speech that was so full of irrelevant and inaccurate information. All hon. Members are well aware of the problems of low flying. There is a requirement for low-flying training for Royal Air Force pilots. The way in which the hon. Gentleman has gone on about joyriding shows how little he knows about flying aeroplanes at high speed. One must train at low level, and one is not breaking the regulations. We must understand that if Royal Air Force pilots are to be the finest in the world, they must have low-flying training. We must, through the Ministry of Defence, see that they cause the least inconvenience. If the hon. Gentleman pushes all low flying out of the Lake District, he will only put it elsewhere. That does not help other constituents.

Mr. Campbell-Savours: First, I have never suggested' that we should push it all out of the Lake District. The hon. Member for Dumfries (Sir H. Monro) has got his facts wrong. Secondly, he generalises. The truth is, as I have already said, with the same number of pilots we have doubled the number of sorties. I want the Minister to tell me why he has doubled the number of sorties. Why does he not go back to the——

Mr. Conway: rose—

Mr. Campbell-Savours: I am sorry, I shall not give way. I intend to wrap up my 35 minutes to allow the Minister 10 minutes in which to reply.
As I said, the Minister does not recognise the anger in all parts of the United Kingdom in which low flying takes place. The truth is that I know the facts, and they are drawn from figures and statistics given by Government Ministers. Since 1978, the number of complaints has doubled. In 1978, according to Government replies, there were 2,290 complaints of low flying in the United Kingdom. Last year, there were 5,304 complaints. Indeed, I am wrong, it has not doubled; it has gone up by more than that. Everyone knows that what is happening is wrong. Everyone, apart from Conservative Members who are so obsessed and preoccupied with defence matters that they do not look at the issue objectively, knows that the pilots are breaking the rules. Everyone knows that there should be a proper review to secure a reduction in the number of sorties that are taking place.
I put it to the Minister that he will not reply to me. He has no intention of replying to me. He has no intention of changing the rules. Whatever I say, the only thing that will change the Minister's mind on the matter is some pilot veering over London and hitting Big Ben. When he hits


Big Ben and perhaps lands on the Houses of Parliament, Ministers of the Government may finally wake up. Indeed, that happened on a previous occasion, I am told.

Mr. Freeman: The hon. Member for Clackmannan (Mr. O'Neill) asked me to comment on the recommendations of the Select Committee. I do not wish to take up the time of the House by giving detailed answers to all the 14 recommendations, but I shall write to the hon. Gentleman and place a copy of my reply in the Library for the benefit of the House.
I shall, however, refer to two of the key recommendations of the Committee, on which I had the honour to serve. The first was that standing civilian courts should be given the power to award suspended sentences. The Government accept that, and we shall take the necessary steps to ensure that that happens. The hon. Gentleman referred to the rights of the accused and to the so-called accused's friend. We are reviewing the summary powers of commanding officers and we shall certainly take the Committee's recommendations into account.
The hon. Gentleman then referred to the PVR rate—the rate of premature voluntary release applications by officers and service men, as did my hon. and learned Friend the Member for Colchester, North (Sir A. Buck). No doubt we shall return to this in greater detail when we consider the Defence Estimates, but the latest figures indicate that the PVR rate in all three services is still substantially lower than it was under the previous Labour Government. Furthermore, although the rate rose for a number of years following the Falklands conflict, there is now good evidence to suggest that the trend is down.
The hon. Member for Clackmannan rightly expressed concern about the state of the housing stock of our services. We have taken steps in this fiscal year to recycle into our works programme, which involves maintenance of married quarters, and rebuild where necessary, some of the receipts from the sale of vacant quarters and surplus land. That is a direct incentive for the services to improve the state of their housing.
I repeat that there are no grounds for holding a general investigation into allegations of bullying, particularly in the Army. Every serious allegation—whichever unit or regiment it concerns—is properly and fully investigated, and I have every confidence in the procedures used by the armed forces.
We have no intention of introducing ethnic monitoring for those in the services. First, we believe that it is unnecessary because there is no evidence to suggest that there is racial harrassment or discrimination. Secondly—and more important—it would be counter-productive. It would not only prejudice good order and discipline and the moral of the armed forces, but would be resented by members of the ethnic minorities.
I agree with my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) that there is absolutely no case for changing our laws and regulations dealing with homosexuality in the armed forces. The hon. Member for Clackmannan specifically asked me to say something about AIDS. The Government are considering our policy on discharging those who are carrying the virus, and we hope to make an announcement very shortly.
My hon. Friend the Member for Ruislip-Northwood referred to the problem of what to do with civilian

employees in times of transition to war and war itself, and their control by military laws. We would expect emergency powers to be introduced if necessary to meet the sorts of requirements to which my hon. Friend referred. Civilians in the employment of the services would already be subject to service law had an emergency been declared.
The hon. Member for Linlithgow (Mr. Dalyell) raised the question of Mr. Colin Wallace and Mr. Fred Holroyd. I have nothing new to add to the statement that I made in answer to my hon. Friend the Member for Southend, East (Mr. Taylor) on 3 March.

Mr. Campbell-Savours: Why not?

Mr. Freeman: Because the statement that I made then was the truth. It was comprehensive, accurate and a definitive answer to the allegations that had been made.
My hon. and learned Friend the Member for Colchester, North raised the future of D Wing at the MCTC, Colchester. I am well aware of his representations and of those made by Mr. Ken Weetch, and I pay tribute to Ken Weetch's service on the independent board of visitors at the Colchester MCTC. We are aware of the representations and will reach a decision towards the end of this year. I assure my hon. and learned Friend that the decision will take account of his representations.
The hon. Member for Lewisham, Deptford (Ms. Ruddock) raised the case of the stickers and verse used at Upper Heyford. I am not aware of that case, but if the hon. Lady cares to write to me, or to table a question, I shall be pleased to answer in detail. I hope that the hon. Lady will not take offence at my comment, but I regard it as a somewhat trivial issue set in the context of the excellent relationship of the Royal Air Force with the United States air force and the acknowledgement of the tremendous job that the United States air force does in this country in terms of its public relations and co-operation with not only the military but the civilian authorities.
The hon. Member for Workington (Mr. Campbell-Savours) said that he had been singled out for special treatment. Perhaps it would be appropriate if I devoted a few more minutes to his allegations. He said that RAF pilots were joyriding. I reject that allegation. Royal Air Force pilots perform a vital job in a serious way and they are well disciplined. The discipline record to which the hon. Gentleman drew attention, which is the truth, although it excludes minor disciplinary action taken against pilots, speaks for the excellent way in which our pilots have observed the regulations, so I reject the hon. Gentleman's allegation.
The low-flying system, which was introduced by the last Labour Government in 1979, is as safe as we can make it. The accident trend is down, in the number of military aircraft that we lose and the number of casualties. There has been no civilian casualty this decade due to fast jet military aircraft activity. We spread the burden as fairly as we can. If we were to restrict activity in the hon. Gentleman's constituency, that would be reflected in complaints from the general public and other hon. Members.
The hon. Gentleman said that I had failed to publish statistics about the number of pilots killed. That is not true. If he re-reads the letter, he will see that I referred him to the Statement on the Defence Estimates. He may think that that is an obscure document, but I am sure that that


view is not held by other hon. Members. It is an important document which we take great care in publishing each year.
The hon. Gentleman also said that there had been an excessive loss of aircraft. I answered the questions that he tabled about Jaguar and Tornado aircraft. These are sad losses. There is an unfortunate tendency in the remarks of some who comment on the accidents to concentrate on the loss of equipment, not on the tragic loss of life. I am sure that all Conservative Members would send their condolences to the families of the pilots who are lost in these tragic accidents. The attrition rate that we suffer is not unusual or exceptional. Sadly, it is inevitable with the low-level training activity undertaken, and I have already explained why we have to do it.
I can give the hon. Gentleman good news about the monitoring equipment. The Skyguard equipment to which he referred is being introduced by the RAF——

Mr. Campbell-Savours: I thank the Minister.

Mr. Freeman: I am grateful for the hon. Gentleman's compliment. The Skyguard equipment will be used in coming years. Steps have been taken to introduce that equipment for monitoring the activities of fast jet flights.
The hon. Gentleman asked why the same number of pilots are doing more flying. The Government have substantially increased the resources available to all three services, including the RAF, so there are more aircraft, more fuel is available and there is more training.

Mr. O'Neill: Will the Minister answer two questions? Where will the monitoring equipment be employed? What is happening with the monitoring equipment employed in respect of drug abuse and drug taking by the armed forces? I raised that latter point, but the Minister did not answer it.

Mr. Freeman: I shall write to the hon. Gentleman on the point about drug abuse, and if he cares to table a question I shall answer it in the normal way.
I shall not tell the hon. Member for Workington where we will deploy the Skyguard equipment, because that would vitiate the purpose of using it.
Finally, my hon. Friend the Member for Shrewsbury and Atcham (Mr. Conway) asked about the regimental system. The regimental system is intact and will remain so. It has contributed to our loyal, efficient Army -characteristics that are shared by the Royal Navy and the Royal Air Force.

Question put and agreed to.

Resolved,
That the draft Army, Air Force and Naval Discipline Acts (Continuation) Order 1987, which was laid before this House on 26th June, be approved.

Orders of the Day — Channel Tunnel Bill

The Minister for Public Transport (Mr. David Mitchell): I beg to move,
That the Amendments to the Channel Tunnel Bill set out in the Lords Message of 7th May, in the last Session of Parliament, be referred to the Examiners of Petitions for Private Bills.
This is simply a procedural debate to check that the Government agent has complied with House of Commons private business Standing Orders.
The Bill was extensively considered in the House in the previous Parliament before being passed to another place. Subsequently, the House carried the Bill over to this Parliament. It has already during this Parliament been reintroduced, passed again formally and on Monday it completed its passage through the Committee of the whole House in another place. This motion simply enables the Examiners of Petitions for Private Bills to consider whether the private business Standing Orders of the House have been complied with over certain amendments made by the Select Committee of another place, relating to access roads to the Cheriton terminal. I should explain that the motion does not give the House's approval to those amendments. It allows only certain necessary and important procedural stages to be completed. When another place has completed its work, the House will, on Commons consideration of Lords amendments, have the opportunity to examine all its amendments, including these particularly important ones.
Hon. Members will recall that the Bill, as originally introduced into the House, provided for a road access from the M20 that passed between the villages of Newington and Peene into the north-west corner of the terminal site. Local authorities, amenity societies and many local residents petitioned the House against those proposals. The Select Committee of the House was instructed to consider alternative access. As the House will recall, the Select Committee here did not favour the alternative. Subsequently, however, these access proposals were revised and a new package known as the "Joint Southern Access" was agreed by Eurotunnel, Kent county council and Shepway district council, which met the operational concerns of the Select Committee of the House, and had the environmental benefits of the alternative proposals. These revised arrangements found favour with the Select Committee in another place, which amended the Bill accordingly.
That is why we have this procedural motion on the Order Paper. It remits those access amendments to the Examiners of Private Bills, who will see whether Standing Orders have been complied with.
Finally, I remind hon. Members that these amendments received the support of the vast majority of those petitioners affected, and that the substance of those amendments is not under consideration tonight. We shall come to them with the Commons consideration of the Lords amendments.

Mr. Michael Fallon: The motion is the culmination of the long and detailed consideration that was given to access proposals alternative to those that were originally set out in the Bill. It is right to say that those alternative proposals would not have been considered at


all if it had not been for my hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), who, from the beginning, advanced his constituents' interests by putting forward, in consultation with his local council, these alternative access proposals. It is fair to say that he did not entirely persuade the Committee or Eurotunnel at the first time of asking, but because of the way in which the Select Committee was able to consider those proposals the groundwork was done, and it was then possible for the Select Committee in another place to adopt the new, agreed, scheme that the Minister described to us. As my hon. Friend made clear, those amendments are the subject of the Lords Message, and are not the subject of our debate tonight.
The motion is technical and procedural, but none the less important. As with many of the procedures with which those who promote a Bill have had to comply, it is a further safeguard, in that the Government Agent will be required to prove to the Examiner that the Standing Orders have been complied with in all other respects. Obviously there has been a technical breach because of the annual cycle and the dates.

Mr. Jonathan Aitken: There seems to be a conspiracy of silence at this early stage of the debate, because my hon. Friend the Minister and the stand-in for the former Chairman of the Select Committee seem to be under the impression that the Standing Orders have not been breached. As the Examiner will discover, the Standing Orders have been violated.

Mr. Fallon: It should be obvious to everyone that, in the technical sense of the date, the Standing Orders have been violated, because the Standing Orders of the House envisage an annual procedure, and because of the way in which the Bill was originally presented, out of the autumnal cycle, and because of the way in which the revised access arrangements have been devised to suit the interests on the ground, it is inevitable that the Standing Orders have not been compiled with in terms of the date. The Government Agent will be obliged to prove to the Examiner that the Standing Orders have been complied with in every other respect. That is a very important safeguard, not perhaps for my hon. Friend's constituents in Thanet, but for the constituents of my hon. and learned Friend the Member for Folkestone and Hythe, who may be affected by the revised joint scheme. I should have thought that my hon. Friend the Member for Thanet, South (Mr. Aitken) would have paid more attention to those necessary safeguards.
The other place has already agreed that such an examination should take place, and the only remaining consideration is whether this technical examination should be delayed. Perhaps my hon. Friend the Member for Thanet, South would like it to be postponed indefinitely, but that would not make sense. We already know what the Lords amendments are. They are contained in the Message. They have been agreed and printed, and soon they will be considered by the House. It would serve no purpose to delay their technical examination any longer, and I therefore commend the motion to the House.

Mr. Julian Brazier: The House will be pleased to know that I will keep it brief, as we have had

many late nights. It is with some sadness that, after less than a month in the House, I am rising to speak against a Government motion. I should say that I support the Government's values strongly.
The first experience that the new boys had of the procedures of the House was the election of Mr. Speaker a few weeks ago, and I was impressed by the historical allusions to the many occupants of the Chair who have risked their names, and sometimes their lives, to protect the liberties and customs of the House. I wish to quote Sir Thomas More, of whom there is a picture in the Central Lobby. When Cardinal Wolsey arrived in the House, he recognised the cardinal in his essential role as the King's Lord Chancellor, but then went on to say that his presence was
neither expedient nor agreeable with the ancient liberties of this House.
The distinction that Thomas More made is especially relevant to the procedural motion. The substance of the amendments as they stand—I shall come back to the motion in a moment—seems fair. In common with my hon. Friend the Member for Darlington (Mr. Fallon), I congratulate my hon. Friend and learned Member for Folkestone and Hythe (Mr. Howard) on the work that he has done on this matter. However, the manner in which the amendments are being steam-rollered through and the fact that the procedural motion is being pushed through is an outrage.
Let us be absolutely clear. At this moment we are not talking about the Channel tunnel or the frailties that it will build into our European trading pattern. We are talking about maintaining the procedures, customs and traditions of the House. Those customs do not exist solely to ensure that hon. Members may have free and fair debates, but also to protect the rights of ordinary, English citizens.

Mr. Dennis Skinner: Get stuck into the Government, boy.

Mr. Brazier: I am grateful to the hon. Member for Bolsover, (Mr. Skinner) for his support. I never expected, so early in my career in the House, to be on the same side of the argument as the hon. Gentleman.
The Government are perfectly aware that the motion is totally unnecessary for the passing of the Channel Tunnel Bill. It is also totally unnecessary legally. We are aware that the Government are extremely anxious to get the motion through so that they can get the rest of the legislation through before the summer so that this wretched, half-cocked financial package that is being put together in the City does not go the same way as the package for Canary wharf.
Tonight we are being asked to refer the so-called amendments from the other place to the Examiners. However, the other place has not even finished considering the amendments. The other place has not got as far as the Report, let alone Third reading. We do not know whether the amendments before us will be the Lords amendments.
I agree with my hon. Friend the Member for Thanet, South (Mr. Aitken) that the Bill has been steam-rollered though at every stage. The last time that we debated a motion similar to the one before us now it went to the Examiners. They found that the individual rights of citizens, whose lifestyle was to be effected, had not been fully maintained.
As the result of the Examiners' findings, the motion was sent to the Select Committee on Standing Orders. The


Committee discussed this motion, this breach of Standing Orders, with such heat that it is common knowledge that it required the casting vote of the Chairman to get the anomalies through.

Mr. James Wallace: Is the hon. Gentleman suggesting that these amendments should not go to the Examiners upstairs in case there are other such violations?

Mr. Brazier: No, I am suggesting that they should go to the Examiners, but in their good time, when the other place has finished considering them.
I should like to give a brief quotation from the proceedings of the other place on the procedure. It illustrates the extent to which this business has been steamrollered through. The Chairman of the House of Lords Select Committee considering this matter said:
Before I call on the Parties to introduce themselves there is one matter on which the Committee seek an early answer from the Promoters. The Committee are most concerned to learn that despite public assurances to the contrary, the Department of Transport did not intend to publicise the date 18 February, the day by which Petitions had to be lodged, and that the Department was not induced to honour its undertaking until halfway through the petitioning period.
The answer that the Committee received from the Government's representative was long-winded and said nothing. Therefore, the Cross-Bench peer who was chairing the Committee—it is sad that it had to be a Cross-Bench peer of the other place that brought this matter up rather than a Member of this House—replied to that answer and said:
It is a slight on the Petitioners in our opinion. I accept that the assumptions that you have made are not unreasonable, but … there is a very clear undertaking made in that leaflet and the Department has reneged.
Finally, I wish to comment on the spirit of the procedures, which is equally important.

Mr. Fallon: I hope that my hon. Friend is aware of exactly what he is suggesting. It is precisely to ensure that we do not have the kind of breach of the Standing Orders that he alleges may have taken place that we are referring the new amendments to the Examiners. Considerable private interests are affected by the new joint southern access scheme. It is important that those interests have all the opportunities afforded to them under our procedures and that the examination begins as soon as possible. I cannot see how my hon. Friend can serve those interests by postponing that examination.

Mr. Brazier: My hon. Friend said that the purpose of the motion was to ensure that the Examiners examined these amendments. He knows that the motion is designed to ensure that these points are examined earlier than would normally be the case, and before the other place has completed its consideration. We think that the procedures and customs of the House, at this late stage on this long Bill, should be carried out properly according to traditional fashion. I wanted to say something about the spirit of the procedures. When this belated document was sent out it said:
If you arc affected you can get an opportunity to present your views to a Select Committee considering the Bill".
Elsewhere it said:
It is up to the Select Committee to decide who is called,
but it went on to say:
but no doubt they will want everybody who will be genuinely affected by the scheme to have an opportunity to make their voice heard in Parliament".

Those were the assurances from the Department of Transport. We all know that nothing approximating to that actually happened. In no way do I suggest that my hon. Friend the Member for Darlington (Mr. Fallon) and his Committee did not work hard, but strength of feeling about the Bill was such that a vastly greater number of petitions were received on this motion than have ever before been received this century—no fewer than 5,000. That did not include the enormous number of people who wrote to the Committee after the deadline, which had not been properly advertised, had expired. I and many other hon. Members received letters saying, "Please speak up for us. Why were we not allowed to appear at these Committees?"
It is totally unnecessary for the Government to put forward the motion tonight. If they do, alas two things will happen. First, they will be driving a few—I hope that it will be more than a few—of their loyal supporters into the No Lobby. Secondly, they will be sending the clearest possible message to the markets that they know that this lame duck will not fly unless it gets off just before the wind changes.

Several Hon. Members: rose——

Mr. Deputy Speaker (Sir Paul Dean): Order. Before I call the next hon. Member, I should point out that I deliberately allowed the hon. Member for Canterbury (Mr. Brazier) to stray fairly wide. I know that he has a strong constituency interest in this matter, and also that he was not involved in the proceedings on the Bill in the last Parliament. I remind the House that this is a comparatively narrow procedural motion. We are deciding whether these amendments should go to the Examiners of Petitions for Private Bills.

Mr. David Shaw: I, too, normally support the Government, because they stand for the rights of private individuals, but I am concerned that, in this matter, the rights of private individuals have been abused and that there has been a considerable rush to get the legislation through.
My hon. Friend the Member for Canterbury (Mr. Brazier) and I were not here during the last Parliament, but it seems that some strange things happened during the passage of the Channel Tunnel Bill. Indeed, the project has been promoted in a strange manner throughout. The second fund raising, Equity II required three telephone calls by the Governor of the Bank of England to each fund manager in order to raise the money.
The amendments that are the subject of the motion have not even been finally approved by the House of Lords, which seems another example of a lack of proper procedure. That worries me, because the Bill, though not yet considered by the Lords, has passed through the Commons, and, as my hon. Friend the Member for Canterbury said, many petitioners and would-be petitoners who wanted to joint the petition process were caught out by the fact that the 18 February deadline was not properly advertised. I had to spend all my time and resources to meet the deadline when I put in my petition. Hundreds of my constituents missed out on getting their petitions in. The Chairman of the House of Lords Committee made the specific point that he was not happy with the way in which the Government had behaved, and my constituents should not have been treated in this way.
I understand that the amendments will be referred to the Examiners of Petitions, but, as my hon. Friend the Member for Darlington said, they all relate to improper procedures. I wonder how the investing public, in September and October, will be asked to invest £700 million in a project that is founded on improper procedures. One wonders why there is such a rush to push the project forward. There are problems throughout it.
In the prospectus of Eurotunnel, dated 20 October 1986, the shuttle system was referred to in two paragraphs, but there was no reference in the appendices to the prospectus as to the engineering feasibility of the shuttle system, and whether or not it would work. That is yet another example of how the whole project is flawed from start to finish.
It has been said by the Government that no public money would be invested in the project, but the amendments are about roadworks, and it is inconceivable that public money should not be involved. That concerns me, because I understand that, recently, neither British Rail nor Eurotunnel would publish details of the agreement reached on 12 May concerning capacity use and the charges that may be payable, which are material information to any prospective investor who may be required to invest in the prospectus that will be issued later in the year.
The provisions, and the considerations of procedure, seem to be in advance of the Lords amendments. It is possible that the Lords may decide to change the amendments even further in the next week or so so the motion is surely unnecessary. It is being rushed through, and I urge the Government to withdraw it tonight, or I, too, shall be forced into the No Lobby.

Mr. Teddy Taylor: I wish to speak for only three minutes. As has rightly been said, the proposal is a narrow one. I ask hon. Members seriously to consider whether it is right for us to accelerate the technical examination of the amendments rather than delaying it. Since the Bill left the House, two of the basic assurances given in clause 2 and clause 40 have been changed, not by amendment of the Bill but by executive action. Clause 2 states specifically that no Minister of the Crown would guarantee or give public funds towards the project. Clause 40 states that British Rail would not be committed to provide funds, or that the Government could not do that for it.
Since the Bill left the House, because the project seemed to have no prospect whatever of obtaining the private funding on which it was based, by executive action the Chancellor of the Exchequer, as a member of the board of the European Investment Bank, has agreed to give to the project a cheap loan of £1 billion. That is a huge sum and there can be no question but that it is public money because if the European Investment Bank folds the Government will be responsible and the Chancellor is a director. That fundamental change has been made since the Bill left the House.
Secondly, although clause 40 provided that there would be no guarantees and no funding from British Rail and the position was set out specifically in a letter to British Rail, the Government have sent a further letter releasing British Rail from that obligation and the Minister has announced

to the House that British Rail has committed itself to regular monthly payments irrespective of the use of the tunnel. In other words, instead of the risk being carried by the private investor, it will be carried by British Rail and if traffic does not use the tunnel all rail users will suffer. British Rail may be right or wrong, but its passengers will be carrying a fair slice of the risk if guaranteed minimum payments are made to Eurotunnel irrespective of tunnel use.
The Government are asking us to speed things up and to accelerate consideration of the amendments by the Examiners. The Government wish the amendments to be dealt with faster than would normally be the case when the amendments have not even been fully considered by the House of Lords. If the Government had presented amendments, if they had said that they were terribly sorry but they had now discovered that the project could not be financed by private investment because private investors were not interested—the last flotation was a flop and the City regards the project as a potential dead duck—if they had come forward with amendments to provide for a cheap loan from public funds through the European Investment Bank, that would be fair enough. If they had come back and said that, despite their assurances that there would be no British Rail funding they had changed their minds, that would also be fair enough. The House could then have considered those amendments and perhaps decided that the project was such a good thing that public money should be invested in it and British Rail should carry the can even though if things went wrong every rail passenger in every constituency would have to find the money to make good the loss. The Minister may say that there will be no loss because British Rail's judgment is sound, but if that judgment is wrong every member of the travelling public will have to carry the can.
I therefore appeal to the House, before agreeing to this exceptional measure to accelerate the procedure beyond the normal pace, to stop and think whether that is the right thing to do when the Government have changed the basis of the Bill by altering clauses 2 and 40, not by means of amendments to be considered by the House or by a Committee but by executive action in getting the European Investment Bank to provide cheap loans from public funds and telling British Rail to forget all previous instructions and make guaranteed minimum payments to Eurotunnel irrespective of tunnel use. I suggest that, far from accelerating the procedure, we shold stop for a week or two and ask the Governmen to justify the fundamental changes that they have made.
Let there be no mistake about it. This will not now be a privately financed venture. It will be partly financed by public funds from the EIB and partly guaranteed by British Rail. We must ask ourselves whether it is fair or reasonable to go ahead on the basis of public funding because that is a wholly different question from that which was put to us on Second Reading. We must stop and consider whether it is right to speed things up when the whole basis of the project has been changed.

Mr. Keith Speed: The last three speeches have been a real trip down memory lane, with latter-day Cassandras pouring cold water on the scheme. They had nothing to do with what we are dealing with, as was admirably observed by my hon. Friend the Member for Darlington (Mr. Fallon).
As for the speech of my hon. Friend the Member for Southend. East (Mr. Taylor), we had all this about the European Investment Bank in the last debate but a couple. Indeed, I challenged him then, and spoke of the Dartford tunnel and other projects in which the European Investment Bank was investing. He now apparently blames British Rail for backing its commercial judgment after tough negotiations. I was under the impression that he was a Tory and believed in BR using its commercial judgment and acting commercially. That is apparently wrong, however.
I understand why my hon. Friend the Member for Dover (Mr. Shaw) spoke as he did. I understand the difficulties there. I do not understand, however, the constituency problem for my hon. Friend the Member for Canterbury (Mr. Brazier). There is no environmental disadvantage for Canterbury.

Mr. Brazier: On a point of order, Mr. Deputy Speaker. Is it in order for my hon. Friend to comment on my constituency matters?

Mr. Deputy Speaker: I suggest that the hon. Gentleman leaves that to me.

Mr. Speed: It is quite clear that the object of my hon. Friends' speeches is to delay matters, as they said. We in Kent also have constituency interests. We are interested in 1,000 or 1,500 heavy lorries leaving Kent roads. We are interested in commercial and other developments and employment in areas such as Thanet and the south coast. I am sure that my hon. Friend the Member for Canterbury is as well.
The delays for which my hon. Friends are asking mean delays into the recess to kill the autumn funding. They are miffed. Under the leadership of Alastair Morton, we have a management team that will make a great success of the project. The quicker the House gets on, the better it will be for all concerned. We have a magnificent record of delaying every imaginative scheme under the sun and, if all else fails, we set up a royal commission. I am surprised that that has not been mentioned tonight. For God's sake, let us get on with it and stop snivelling and whining. The French have already passed a similar measure and we should do the same.

12. 17 am

Mr. Peter Snape: I hesitate to intervene in this public display of grief in the Tory party. I do not often find myself speaking for all of the Opposition, but I think that I can even take the hon. Member for Orkney and Shetland (Mr. Wallace), who represents the alliance, or whatever it is called these days, with me when I say that seldom have I seen a more public display of petulance than that which we have had from Conservative Members this evening.
Some of us are easily shocked by this sort of thing. One would have thought that Conservative Members would be dancing in the aisles—if that were possible in this place—at the project, but the motion, which I regard as innocuous, has put them verbally at each other's throats.
It seems that whatever the Select Committee which considered the project did would have been condemned. Originally, it had no brief to examine other access to and egress from the terminal. The Government instructed the Select Committee to consider the choices, which it did. It reached a view with which the hon. and learned Member

for Folkestone and Hythe (Mr. Howard) and others disagreed. I do not complain about that. Because of that, changes were agreed to by all parties in the project and, because of those agreements, the motion appears before the House.
It is not for me to defend the Government's business managers or those who drafted the motion, but it seems that, although many controversial matters, which the House must debate, arise from the issue, tonight is not the right time to debate them. There will, I hope, be time to debate those matters, some of which have been mentioned tonight. Given the innocuous nature of the motion before us, however, much of the hot air that has been expended tonight, and much of the surprising disagreement that we have seen among Conservative Members, has been wasteful, to say the least. I hope that, when we come to the time to debate the issues, Conservative Members who have spoken tonight will give us the benefit not only of their knowledge of the procedures of the House, but of their understandable constituency concerns. I also hope that the Minister will bear in mind that those concerns are legitimate, and will find adequate answers to satisfy his colleagues.
I repeat that I do not think that tonight is necessarily the night to discuss these matters. The Opposition feel that the motion is somewhat innocuous and purely procedural, and that is how we shall look at it tonight.

Mr. Jonathan Aitken: It is always wise to be suspicious when both Front Benches sing in unison that the motion is entirely innocuous. I am glad, therefore, that the Jolly Roger of rebellion has been hoisted so early in this Parliament on the Conservative Benches. It may cause the Patronage Secretary a qualm or two, but my hon. Friends the Members for Dover (Mr. Shaw) and for Canterbury (Mr. Brazier) are to be warmly congratulated on their stand. They will find that the life of a Government Back Bencher is not always easy: someone else said that one must steer a path between sycophancy and rebellion, but an hon. Member will never go wrong if he sticks up for the interests of his constituents.
This seemingly innocuous motion cloaks a real fleshand-blood, gut issue of considerable importance. To realise how important it is—and I happen for once to be on the side of the amendments behind the motion—it is necessary to go back to last year, when almost exactly the same motion was on the Order Paper on 18 April. It seemed a minor matter—that the Examiners were to be asked to consider parts of the Channel Tunnel Bill. Hon. Members may have thought, when they saw tonight's motion on the Order Paper, that they were going to hear the great issues of whether the geography of the continent of Europe should be changed, whether we should ruin our maritime industry and whether we should allow Japanese and Arabian financiers to have an artery into Europe at our expense. But none of those issues has anything to do with the motion.
What the motion is about—what it cloaks—is a simple issue of fair play. The fair-play issue is this: have Standing Orders been broken? Standing Orders of the House are not written for some meaningless and point less purpose. We are sent here not just to pass laws but to preserve liberties, and the Standing Orders are here to


preserve one or two crucial liberties for individual petitioners and individual constituents who want to exercise their rights.
One of those rights—and the issue was the same a year ago—is to be able to read in the local newspaper certain notices published on due dates in accordance with the Standing Orders of the House. A minimum period of notice was given. If ever there was an exercise in deception and cheating, it is the exercise that took place last year and, I am sorry to say, has taken place again a year later. The Government and their Civil Service advisers seem to have learnt nothing and forgotten nothing. Last year, they cheated on the dates. They said that they were going to put a lot of notices in newspapers by certain dates to give people an opportunity to petition, and they broke those promises: they broke the orders.

Mr. Fallon: I am rather at a loss to understand why, if that is my hon. Friend's line of argument, he should be seeking to oppose the motion—if that is what he wishes to do. Surely it is not possible to test whether the Standing Orders have been complied with unless we pass the motion and send the amendments to the examiner, so that the Government Agent has to make out his case.

Mr. Aitken: My hon. Friend the Member for Darlington (Mr. Fallon) has already admitted that the Standing Orders have been breached. I think that he said something about the autumnal cycle, which is an interesting explanation, since we are nowhere near the autumn. However, he does have a point and. as I said earlier, I am in favour of the motion and the amendments behind it. However, the fact there has been a violation of Standing Orders does not mean that everybody should just nod this through. Some people's rights have been gravely affected. My hon. Friend the Member for Ashford (Mr. Speed) seemed to be giving my hon. Friend the Member for Canterbury a ticking off for not looking after the interests of his constituents properly. A year ago, the House published a notice saying that announcements had been published in a paper called the "Canterbury Times". That paper did not exist, the notices did not exist and nothing happened on the days on which it was said the announcements had been published. If ever there was an example of——

Mr. Brazier: I should like to take this opportunity to say that the reason why I did not take up the point made by my hon. Friend the Member for Ashford (Mr. Speed) here and now is precisely because the right opportunity to do that, as he knows, is in a fortnight, and not now.

Mr. Aitken: My hon. Friends the Members for Dover and for Canterbury have shown that they have strong and articulate voices in their constituents' causes and they can be proud of that.
There are some rights of importance. The amendments that lie behind the motion are about a change in the route of a road. Although I happen to welcome that change of route, the fact remains that if any major road construction takes place it involves people's rights. Compulsory purchase orders will be served, two listed buildings will be destroyed and several people's environments will be changed dramatically. All the people involved should have

had a proper announcement in accordance with the Standing Orders of the House to ensure that their rights and liberties were protected.
I would not be so hostile about this little motion if we were not repeating ourselves. The rules were broken last year and they were broken again just before the Select Committee in the other place, and the proceedings had to open with a grovelling apology from Government counsel, saying how they regretted that all the petitioning rules had been bent. Now, here were are again, violating the Standing Orders of the House.
I want to ask my hon. Friend the Minister an important question. The motion seeks simply to refer the 7 May message from the other place to the Examiners. The Examiners, as my hon. Friend the Member for Darlington has already said, are pretty certain to have to refer the broken promises to the Select Committee on Standing Orders. I want an assurance from my hon. Friend that the Select Committee on Standing Orders will be convened and will sit and hear evidence.
I have heard a disturbing rumour that another little cheating plan is on the way, which is not to have a Select Committee on Standing Orders meeting and to try to bounce the matter through with the Government's majority on a late night order such as this, so that it is not considered at all. That would not be fair. One has only to look what happened last year. Mr. Deputy Speaker, you are as good a witness as any of the fact that the Select Committee on Standing Orders, of which you and the other Deputy Speakers are Members, took the issue whether Standing Orders had been violated very seriously. You deliberated for about six weeks. You heard evidence from many witnesses, including myself, and at the end of the day there was a dead heat on the Committee. The Chairman of Ways and Means declined to exercise his casting vote, as a result of which the issue had to come back to be debated on the Floor of the House. Severe criticisms were made of the Government's idea of fair play and at the last minute a compromise was cobbled up to give more petitioning as the result of an announcement by a Minister. That was good work by the Standing Orders Committee. I want to hear a firm promise that if the motion is passed and if the Examiners, as they must, say that the Standing Orders have been broken, the issue will be referred to the Standing Orders Committee. I would like, indeed I insist, on a clear answer on that point.
A year ago about eight weeks of the House's time was taken up with what was seen initially as a small procedural issue, a mere innocuous matter. The same language was used as that we have heard tonight. It was not innocuous to the constituents of my hon. Friends and myself in east Kent who have to face the magnitude of what the Channel Tunnel will do to their environment. It is not some minor little mistake that we have now seen two consecutive breaches of Standing Orders. There was an apology to the House of Lords before the proceedings could begin because the Government broke the petitioning rules.
My hon. Friend the Minister loves a good quotation, and in conclusion I give him this one from Oscar Wilde's play "The Importance of Being Earnest". Lady Bracknell said:
To lose one parent…may be regarded as a misfortune; to lose both looks like carelessness.


This is worse than carelessness. We are violating the Standing Orders for the second time. We should not put up with it. We should make our views clear and we should vote against this wretched little motion.

Mr. David Mitchell: My hon. Friend the Member for Darlington (Mr. Fallon) drew attention to the benefits of the revised agreed access road and paid a well deserved tribute to the Minister for Local Government, my hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard). Tonight we are dealing with a necessary step on the road to enabling my hon. and learned Friend's constituents to have the benefit of a change in the approach roads to the terminal which they want, which the joint consultation committee which has met in Kent wants, which the county council wants, which the Shepway council wants and which many of the petitioners want. It is to enable the wishes of the local people to be complied with that we are dealing with the matter at all. The other place came to the conclusion that it would be right and proper to proceed in that way. It is to enable that to happen that we are dealing with the motion.
My hon. Friend the Member for Canterbury (Mr. Brazier) said that the motion had been brought forward with undue haste. I disagree with him. The motion refers the amendments to the Examiners, who must consider whether standing orders——

Mr. Brazier: Will my hon. Friend give way?

Mr. Mitchell: Perhaps I can just complete this passage. The Examiners must consider whether standing orders were complied with. The notices and newspaper advertisements were issued in late July and early August 1986. The deadline for petitions to the House was 26 September 1986 and nearly 10 months have passed since then. I can see no reason why this stage should not be completed now. The longer we delay, the less clear will be the memories of those involved and the less relevant the Examiners' hearing.

Mr. Brazier: I think my hon. Friend misheard me. I did not suggest that the motion had been brought forward with undue haste. I said that the bringing forward of the motion was inducing undue haste. After all, there is only a week to wait for the Lords amendments to be ready.

Mr. Mitchell: My hon. Friend makes a point, but the amendments were unanimously agreed by the Lords Select Committee. They were not opposed in the Lords Committee of the whole House. One cannot suggest that it is at all likely that in the subsequent stages those amendments will not be maintained. Therefore, it is right and proper, if they are to be maintained, that they should be referred to the Examiners for as early consideration as possible.
My hon. Friend the Member for Thanet, South (Mr. Aitken) complained of the apparent failure to comply on timing. The amendments could not comply on timing because they were made during the passage of the Bill. There would have had to be a degree of clairvoyance in ascertaining what those amendments were before the Bill started its passage to satisfy my hon. Friend. But we all know that my hon. Friend will not be satisfied whatever happens.
My hon. Friend the Member for Dover complained about the closing date for petitions. It was extended and my hon. Friend was much involved in that. He went on to make an important point.

Mr. David Shaw: rose——

Mr. Mitchell: I will just deal with that point. My hon. Friend argued that, as public money was being spent on roads leading to the terminal, that was a form of Government subsidy to Eurotunnel. I hope that I have understood correctly my hon. Friend's contention.
If there is no tunnel, the amount of traffic using the: roads of Kent is expected to double by the end of the century. Is my hon. Friend the Member for Dover suggesting that, as the Department of Transport builds roads to Dover harbour to enable traffic to reach it, that is a subsidy to the ferry operators? Of course it is not, and no more is a subsidy being given to the terminal operators when roads are built to take traffic to that destination instead of enlarging the roads to Dover that lead to the ferries. I understand the debating point that my hon. Friend has made, but it cannot be said that he has raised a valid argument.
My hon. Friend the Member for Southend, East (Mr. Taylor) repeated the claim that he has made previously that public money is being invested in the Eurotunnel project because the European Investment Bank is to make available a loan of £1,000 million to Eurotunnel. My hon. Friend is mistaken. There is no Government guarantee and the identity of the bank's board members has nothing to do with the matter. The loan is not guaranteed or backed by any form of guarantee. It is a commercial loan to the European Investment Bank under commercial lending arrangements from banks and financial institutions. My hon. Friend shakes his head, but that is the fact.

Mr. Teddy Taylor: Does my hon. Friend accept the simple proposition that the European Investment Bank gets its money only from subscriptions from member states such as Britain and from loans that they make that are guaranteed by the Governments collectively?

Mr. Mitchell: My hon. Friend is wrong. The capital of the European Investment Bank may be subscribed by Governments, but they are not lending capital. They are lending money that they are borrowing commercially from financial institutions and banks. There is no Government money involved and yet again my hon. Friend is chasing a red herring. He will not be able to land it when he seeks to do so.
My hon. Friend the Member for Southend, East claimed that British Rail is prevented by the Bill from giving guarantees. He added, however, that it will do so, in breach of the terms of the Bill, under the financial arrangements that it is making to pay for the use of the tunnel. My hon. Friend is wrong. A purely commercial arrangement is being entered into to set out the terms under which payment will take place. That will be on a monthly basis with a proportion of the anticipated usage topped up by the actual usage. That is a normal commercial transaction and there is no element of guarantee in it.
My hon. Friend the Member for Ashford (Mr. Speed), in robust and rumbustious style, set out the case for getting on with the project. I think that the entire House would support him save for a small minority.
My hon. Friend the Member for Thanet, South sought assurances that the Standing Orders Committee would consider the matter. It would be wrong to consider what we shall do after the Examiners have considered the matter. When they have completed their consideration, we shall be in a position to know the best way to proceed.
I find myself on this occasion in agreement with the hon. Member for West Bromwich, East (Mr. Snape). This is not the time to discuss the substance of the Bill. We are dealing with a procedural matter, and I believe that we should proceed with it as fast as possible.

Question put:—

The House divided: Ayes 139, Noes 16.

Division No. 14]
[12.40 am


AYES


Alexander, Richard
Couchman, James


Alison, Rt Hon Michael
Cran, James


Allason, Rupert
Currie, Mrs Edwina


Amess, David
Davies, Q. (Stamf'd &amp; Spald'g)


Amos, Alan
Davis, David (Boothferry)


Arbuthnot, James
Day, Stephen


Arnold, Jacques (Gravesham)
Devlin, Tim


Arnold, Tom (Hazel Grove)
Dorrell, Stephen


Ashby, David
Douglas-Hamilton, Lord James


Atkins, Robert
Dover, Den


Baldry, Tony
Dunn, Bob


Batiste, Spencer
Durant, Tony


Bennett, Nicholas (Pembroke)
Evans, David (Welwyn Hatf'd)


Biffen, Rt Hon John
Evennett, David


Biggs-Davison, Sir John
Fairbairn, Nicholas


Boscawen, Hon Robert
Fallon, Michael


Boswell, Tim
Fenner, Dame Peggy


Bowis, John
Field, Barry (Isle of Wight)


Bright, Graham
Forman, Nigel


Brooke, Hon Peter
Forsyth, Michael (Stirling)


Brown, Michael (Brigg &amp; Cl't's)
Forth, Eric


Browne, John (Winchester)
Freeman, Roger


Bruce, Ian (Dorset South)
French, Douglas


Buck, Sir Antony
Garel-Jones, Tristan


Burns, Simon
Gill, Christopher


Burt, Alistair
Goodson-Wickes, Dr Charles


Butcher, John
Gorman, Mrs Teresa


Campbell-Savours, D. N.
Gow, Ian


Carrington, Matthew
Greenway, John (Rydale)


Cash, William
Gregory, Conal


Chope, Christopher
Griffiths, Sir Eldon (Bury St E')


Clarke, Rt Hon K. (Rushclifte)
Griffiths, Peter (Portsmouth N)


Conway, Derek
Ground, Patrick 

Coombs, Anthony (Wyre F'rest)
Gummer, Rt Hon John Selwyn


Coombs, Simon (Swindon)
Hamilton, Neil (Tatton)


Cope, John
Hargreaves, A. (B'ham H'll Gr')





Hargreaves, Ken (Hyndburn)
Morris, M (N'hampton S)


Harris, David
Moss, Malcolm


Hay ward, Robert
Moynihan, Hon C.


Hicks, Mrs Maureen (Wolv' NE)
Neubert, Michael


Hind, Kenneth
Nicholls, Patrick


Hughes, Robert G. (Harrow W)
Nicholson, David (Taunton)


Hunt, David (Wirral W)
Nicholson, Miss E. (Devon W)


Irvine, Michael
Page, Richard


Jack, Michael
Paice, James


Jones, Gwilym (Cardiff N)
Peacock, Mrs Elizabeth


Jones, Robert B (Herts W)
Portillo, Michael


Kellett-Bowman, Mrs Elaine
Powell, William (Corby)


King, Roger (B'ham N'thfield)
Raffan, Keith


Kirkhope, Timothy
Rathbone, Tim


Knapman, Roger
Rhodes James, Robert


Knight, Dame Jill (Edgbaston)
Rhys Williams, Sir Brandon


Lawrence, Ivan
Riddick, Graham


Lennox-Boyd, Hon Mark
Rowe, Andrew


Lester, Jim (Broxtowe)
Ryder, Richard


Lightbown, David
Sackville, Hon Tom


Lilley, Peter
Shaw, Sir Michael (Scarb')


Lloyd, Peter (Fareham)
Shephard, Mrs G. (Norfolk SW)


Lord, Michael
Shepherd, Colin (Hereford)


MacGregor, John
Smith, Tim (Beaconsfield)


Maclean, David
Soames, Hon Nicholas


McLoughlin, Patrick
Speed, Keith


McNair-Wilson, M. (Newbury)
Taylor, Ian (Esher)


Major, Rt Hon John
Waddington, Rt Hon David


Mans, Keith
Wallace, James


Marlow, Tony
Warren, Kenneth


Martin, David (Portsmouth S)
Widdecombe, Miss Ann


Maude, Hon Francis



Miller, Hal
Tellers for the Ayes:


Mitchell, Andrew (Gedling)
Mr. Kenneth Carlisle and


Mitchell, David (Hants NW)
Mr. Alan Howarth.


Monro, Sir Hector





NOES


Aitken, Jonathan
Nellist, Dave


Bradley, Keith
Powell, Ray (Ogmore)


Cousins, Jim
Skinner, Dennis


Dixon, Don
Taylor, Teddy (S'end E)


Evans, John (St Helens N)
Wall, Pat


Farr, Sir John
Wareing, Robert N.


Fields, Terry (L'pool B G'n)



Holland, Stuart
Tellers for the Noes:


Janman, Timothy
Mr. William Brazier and Mr. David Shaw.


Lloyd, Tony (Stretford)

Question accordingly agreed to.

Ordered,
That the Amendments to the Channel Tunnel Bill set out in the Lords Message of 7th May, in the last Session of Parliament, be referred to the Examiners of Petitions for Private Bills.

Message to the Lords to acquaint them therewith.

Orders of the Day — Liverpool Health Authority (Inquiry)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lightbown.]

Mr. Terry Fields: Cervical cancer is cancer of the neck of the womb, or the uterine cervix. It is one of the most common causes of the premature death of women. Over 2,000 women die unnecessarily of cervical cancer every year. Those deaths are preventable, provided that adequate screening techniques are used and women receive appropriate treatment. It is important to note that it is incorrect to assume that only older women are at risk. A woman beomes at risk when she begins sexual intercourse, which varies widely from person to person. Therefore, there should he no minimum age limit for women requesting a first smear, and publicity should he given to the need for screening from at least the age of 20.
In 1972, 15 per cent. of all women with cervical cancer were under 34. By 1982 that figure had risen to over 25 per cent.—it is on the increase. In 1987 the Liverpool area health authority revealed that, during the 21 months between March 1983 and December 1985, nearly 800 cervical smear test slides had been passed as "normal", when in fact abnormalities were present which required further investigation. The health authority decided that 487 should be recalled. One hundred of those people have since received, or are receiving, treatment and some have had hysterectomies. One can imagine the distress and worry if one's wife, daughter or grandchildren, or if my wife, had that problem. Tragically, there have been reports of at least one death—in the constituency of my hon. Friend the Member for Liverpool, West Derby (Mr. Wareing)—if not more, within the Liverpool area.
Once the error was discovered, the Liverpool health aurthority acted swiftly to trace most of the women. However, about 50 women have yet to be traced. Some have left the area. Others, for whatever reason, have refused to come forward. This incident illustrates how the value of a screening programme can be undermined by behind-the-scenes processes that most people take for granted. The validity of analysis techniques and skills are crucial to the effectiveness of screening for cervical cancer.
The error, which puts hundreds of Liverpool women at risk, must be thoroughly investigated and the findings acted upon by providing screening services throughout the country. The internal review conducted by the Liverpool health authority is totally inadequate for that purpose. For instance, representatives of the community health council have not been allowed to attend the inquiry, even as observers. Health workers called to provide information cannot be compelled to attend. More important, only the inquiry's key findings will be made public. This is done by administrators—place men and women put in by this Tory Government to cut funding to the Health Service, while they are on fat salaries for carrying out the Government's diktats. In those circumstances, there will he no self-criticism from those people or condemnation of their so-called professional performance. Clearly, any irregularities or criminality found will lead to compensation, but the Liverpool people fear that there will be no condemnation from those people.
The evidence presented by workers to the inquiry has shown that members of trade unions did as much as they

could within the constrictions of their professional code of ethics to alert their seniors to the problem. They expressed disquiet. A few union members are not in favour of the public inquiry for which I call because they are aggrieved by the fact that following their previous ordeal, they would have to reappear before the same committee. The reason why they are reluctant to get involved in another inquiry is the way in which the inquiry has been conducted to date. It is my opinion that it has been most unsatisfactory, unjust and unequal. The medical staff — that is, the higher echelons in the pecking order — have each engaged legal representatives, who are allowed to intervene and to cross-examine witnesses, but the same facility has been denied to the union representative, who has been allowed to be present, but only as an observer.
The inquiry has currently been adjourned but will reconvene on 30 July. Perhaps the ground rules will be amended to allow trade union representation and legal representation. However, that is by no means certain at this stage. In any event, it may be too late to make any difference to the outcome of the inquiry, given the evidence that has been presented to date and the results that will ensue.
My view is that the union should have withdrawn from the inquiry when the unequal treatment became obvious. However, the representative concerned at the time felt that he had been asked to observe by his Members and to offer them moral support and he was faced with a difficult choice. I offer no criticism of his performance. However, by participating, the union has given credibility to a behind-closed-doors inquiry, which is what this health authority inquiry is.
The two most vital things that are required from tonight's debate are a public inquiry and a national quality control scheme to report on the smears. That will ensure that monitoring, of the results is carried out, perhaps externally from the Liverpool health authority in this case. At present, the results and the analyses are often left to the clinical judgment of a single pathologist. We demand that stringent controls be placed on the commercial laboratories that carry out such work. Many authorities send the work abroad, making democratic control even more difficult, if not impossible.
The public should be aware that there are widely differing opinions, even in the medical profession, about the usefulness of cervical cytology screening and the type of reporting systems that should be used. That deserves to be debated publicly, because at present many women assume that a single, unified system is in operation. They would not have questioned that in this case nor in the cases of other incidents that have been reported nationally.
Other abnormalities have been taking place in cancer screening in the Liverpool area. As a background to this case we can discuss the unevenhandedness of what is happening. One young women applied for legal aid to take her case forward, to be allowed to make representation and, if necessary, to have legal redress in the event of maladministration in the Liverpool area health authority. However, that has been denied to her because on the analysis of legal people in the Law Society, damage in excess of £500 has not been done to her because of the laser treatments that she has received. On that argument, she could have received the same laser treatment two years ago and has not, therefore, necessarily suffered to the amount of £500. If that is the value placed on the dignity of human life, and especially on women, as dictated by today's caring


society, it is time that we put a stop to it, and this inquiry should expose what has taken place and the treatment of those women.
On the financial side of the appeal that this women will make, in consultation with the community health council and the Liverpool Labour Women's Council, if all else fails, we shall set up a fund and challenge the rulings of the Law Society in this case. We shall take this matter right through the courts on behalf of the women of Liverpool who have been so affected by this maladministration in the Liverpool area health authority.
One of my constituents was diagnosed as suffering from cervical cancer in January. In February it was confirmed, but this woman must wait until December before she can start to receive initial treatment to combat that potential killer disease. A young woman, whom I know personally, went to a Liverpool hospital because of lumps on her breasts and was examined in a linen or broom cupboard in the hospital. Incidentally, this is happening when we have the first woman Prime Minister in the history of this parliamentary system. That is a scandal and a condemnation of her and her Government. This Government's attitude to women has set the women's movement back many years.
In a written reply on 3 July 1987, the Minister reported that 75 health authorities were now computerised. We are talking about 75 out of 191, which is equal to 39 per cent. of all area health authorities. That means that the other 61 per cent. are not computerised. The Minister also reported that 19 of those 75 health authorities had call and recall systems. That means that 9 per cent. of the 191 authorities are attempting to deal with the problem of cervical cancer. I have to say to the Minister, in all honesty, that the people whom I represent and who have been in contact with me believe that this is an exposition of scandalous complacency by a woman Minister dealing with a problem that affects the nation's women.
In the case of the 500 Liverpool women, more concern was shown for older women. As I said, women have shown signs of being at risk at the age of 20, but older women were given preferential treatment in Liverpool because the consultant involved did not consider that the mild abnormalities in young women merited a repeat test to find out what they meant.
I am making 10 demands on behalf of the women's council, the community health authorities in the Liverpool area and Liverpool women. First, we want a national, integrated, National Health Service-based call and recall cervical cancer screening service, because there are many regional variations and we want this to apply to all women. Secondly, we want mobile screening units to visit estates and shopping centres to provide easy access for women. Thirdly, the system should not depend upon women volunteering for smears. It is important that health authorities actively seek out women, especially those known to be in high-risk groups.
Fourthly, screening facilities should be made available at the workplace, or time off allowed to allow women to visit a clinic who could not do so in normal circumstances. Fifthly, we want a full system of Well Woman clinics opearating round the country to provide resources and back-up for women in need. Sixthly, we want women doctors available wherever possible to carry out these tests. We are not being sexist about this, but the experience

of the Liverpool women has distressed and upset them, and they thought that they would have been better served if they had had women doctors to attend to them at such a trying time.
Seventhly, we want follow-ups to be done with sensitivity. A call for a repeat smear test may be due to a breakage or technical problem. and giving that information could reduce anxiety in many women waiting for a repeat visit. Eighthly, we want to ensure that the most up-to-date equipment is available. For example, it has recently come to light that the type of spatula used to take the smear is critical, and in many instances it is not used correctly. Ninthly, we want counselling for the women involved, because of the trauma and worry through which they must go. Those who have been told that they have cervical cancer should not be left to their own devices, feeling some social stigma. We want back-up counselling.
Tenthly, we are actively opposed to the privatisation of any NHS services and support the public ownership of supplies to the NHS. Labour Members, and especially I and my colleagues here tonight, will campaign in our party for democratic control over the Health Service; but, more important, when we are looking for finance, we will go to the drugs and chemical industry and the vast profits that it makes out of the misery of people—in this instance, of women — and put those resources back into the Health Service to ensure that women are taken care of at the point of need.
In the past 24 hours I have consulted some of the women involved in these cases. I asked them, "If you had the facility of addressing Parliament and demanding the inquiry, which you have asked me to do, what points would you make?" they said that the mistakes should have been discovered earlier. Why did it take so long to call them back when the proper procedures should have been carried out? They want to know the truth, but they cannot be sure that they will be given the truth if the inquiry is not held in public. They need to be sure that the mistakes will not happen again. They say that they are not after anyone's blood—they just want to know what went wrong.
The women of Lverpool are really scared about going for a smear. They do not feel sure that they can believe that a negative result really means that they are OK. They need to be sure that the mistakes will never happen again.
I believe that a petition was delivered to the Minister yesterday.

The Parliamentary Under-Secretary of State for Health and Social Security (Mrs. Edwina Currie): indicated dissent.

Mr. Fields: Well, a petition came down from Liverpool. Perhaps the Prime Minister has it tucked away with some of the other petitions that we have brought down from Liverpool. The petition delivered yesterday is symptomatic of the depth of feeling among Liverpool's women and it represents the views of the women of the Liverpool central, southern and eastern community health councils. It also represents the feelings of the Liverpool women's Labour council. The campaign has just started and although we may be talking about some 3,000 names on that petition, the organisation is well in place to take this matter forward, perhaps into a national campaign.
We ask the Minister to respond in a positive way. We are asking for an open inquiry so that women can feel that


the information about the causes of the incident and the remedies to prevent its recurrence will be undertaken, as it has national implications. It is only in that way that confidence in the national cervical cancer screening programme will be restored. That is essential if women's lives are to be saved by the early detection and treatment of pre-cancerous conditions.
My comrades and I believe that the nation's women deserve better treatment than they get from this Government. As I have said before to the Minister, she should not chide and harangue us. She knows what is wrong in these circumstances. If the Minister wants to make a name for herself and wants to do something on behalf of the nation's women she should take hold of this issue. The Minister should go along with us to ensure that there is a public inquiry. Women would be grateful that a woman in Parliament has done something positive to alleviate the sufferings, the worry and the hardship that they presently face under the existing system operated by the Government.
In conclusion — I hope that the Minister does not take too much offence — there are too many people posing as professional Scouses. She comes from up there and she should do something for that place instead of sitting here criticising us all the time.

The Parliamentary Under-Secretary of State for Health and Social Services (Mrs. Edwina Currie): I congratulate the hon. Member for Liverpool, Broadgreen (Mr. Fields) on his success in the ballot. He has raised some important questions on behalf of his constituents and, indeed, many women. I shall attempt to answer them.
The main events of this case took place in Liverpool between 1983 and 1985. I hope that the hon. Gentleman will accept that those events are not and should not be subject to party politics. I share with him and with colleagues on both sides of the House their concern about these events and their determination that we should put things right and learn from events to ensure that the same thing does not happen again. I am sure that that concern is also shared by the trade unions that he quoted at some length.
The hon. Gentleman mentioned that he thought that there had been cuts in the Health Service in Liverpool. However, I must put on record that the gross revenue of the Liverpool health authority for 1982–83 was £114 million——

Mr. Fields: Do not play the same old record.

Mrs. Currie: In 1987–88 the initial cash allocation was £144 million. The number of in-patients treated in 1982 was 80,000 and that figure increased to 88,000 in 1985. I am especially pleased to note that there have been considerable improvements in gynaecology. It is worth giving that information as part of the background to this case.
The hon. Gentleman may know that, yesterday, at the request of his hon. Friends the Members for Birkenhead (Mr. Field) and Liverpool, West Derby (Mr. Wareing), I met Mrs. Lily Hopkins of Fazakerley, who is one of the women tested in 1983 and subsequently shown to be in need of treatment. I admire her common sense and courage. She is now undergoing treatment and is in good

hands. She has been contacted by various other women and has helped make their feelings known. I am glad I had the opportunity of meeting her, and I have asked the Liverpool health authority to take their views into account.
May I say to the hon. Gentleman that he has made one or two errors of fact in his description of cervical cancer. First, we give publicity to the fact that women from the age of 20 onwards—indeed any woman who is in the at-risk group, which the hon. Gentleman accurately described—may come in for a smear test. Indeed, if there is any clinical suggestion that a woman needs a smear test more regularly than the recommended period, it is for her practitioner to advise her and that test is available to her.
According to the hon. Gentleman's own figures, about 75 per cent. of cases are older women. Therefore, we continue to regard the reaching out to older women as a top priority. He said that this was on the increase. It is not. Thank goodness, it is going into slow decline. There is a steady but small decrease in the number of women now dying from cervical cancer, but I share the hon. Gentleman's feeling that it is nowhere near enough and I look forward to seeing a substantial reduction, hopefully along the lines achieved in the Scandinavian countries.
Let me now respond to the 10 points that the hon. Gentleman mentioned as being the requirements of the ladies in Liverpool. I agree with him absolutely on items 3, 6, 7, 8 and 9. We already have the requirement in item 1 or are working closely towards it. I would actively encourage item 4. Items 2 and 5 are matters for the local health authorities. If they wish to organise their services in that way, I would welcome it. I note item 10.
Let me comment further on the events in Liverpool. As the hon. Gentleman knows, on 15 January 1987 the Department was informed by Mersey regional health authority of the concern within Liverpool health authority about the results of tests on cervical smears carried out at the Women's hospital in Liverpool between March 1983 and December 1985.
During this period it appears that 911 tests were misinterpreted, reporting them as negative when, in the light of a recent preliminary re-examination of the slides, many showed evidence of abnormal pathology. During this period some 45,000 cervical cancer smears were examined at the Women's hospital.
The slides of 911 women had to be re-examined. Or these, 300 were eliminated because their slides were found to be normal after the second review; a further 103 women were eliminated by hospital records which showed them as having had further tests or treatment; another 21 women had been married since 1983 and had had a second smear under their married name; and 487 were identified as requiring further investigation or treatment. Of these 487. 437 have already been seen and every effort is being made by the health authority to continue to trace the remaining 50 women who have moved house at least once since having their smear between March 1983 and December 1985.
I became involved in the early weeks of 1987, when I indicated my full support for the plan of action by the health authority. This has included a complex programme of contacting all the women affected and making available whatever facilities and staff were required. The matter was given top priority and received the ready co-operation of consultant gynaecologists, GPs, nurses, laboratory and support staff.
The women have been contacted through their original referral agents — either the GP or clinic they were attending. They have been invited to attend a clinic for advice and, if necessary, examination, repeat smear test, colposcopy or other form of clinical investigation as appropriate, except where this has already taken place. As many as 50 per cent. of the women affected were, or had been, under the care of a gynaecologist already and were therefore already receiving whatever care or treatment was required.

Mr. Robert N. Wareing: The figures the hon. Lady has given are all very well. Nevertheless, the wife of one of my constituents died as a result of cervical cancer which was diagnosed in September 1984, even though that lady's last smear had been as recent as May 1984. What procedures exist to discover that sort of mistake? Surely the mistakes to which my hon. Friend the Member for Liverpool, Broadgreen (Mr. Fields) has referred should have been discovered as early as September 1984 when that lady's diagnosis was made.

Mrs. Currie: I am doing my best to set out exactly what the health authority has been doing. It is as well to put on record exactly what has been going on.
A special community tracing task force was set up in February this year by the Liverpool health authority involving community physicians, nurses and health visitors to make contact with any woman who was sent advice but who failed to respond. A knock-on-the-door approach was also carried out when no response had been registered. This follow-up part of the contact programme has located women in various parts of the United Kingdom and in countries abroad, including Australia, Bahrain, West Germany and Spain.
Some of the women unable to be traced so far have had their cervical smears referred to the Women's hospital from the Bedford clinic — the abortion clinic within Liverpool health authority—and it is possible that they have tried to conceal their identities, perhap by giving false names and addresses.
Nevertheless, the health authorities are continuing to pursue the matter of the women whom we have not found so far. I must say at this point that I have been very impressed with the efforts of Liverpool health authority since this problem came to light. It has put the patients' interests first and have acted with commendable speed and thoroughness. I know that it will continue to make strenuous efforts to trace the remaining women. In the meantime an independent and rigorous review of the 911 slides is being carried out under the direction of a distinguished professor of histopathology, in order to assist the health authority in its inquiries.

Mr. Fields: rose——

Mrs. Currie: I met last night the chairman of the Liverpool district health authority, Mr. James Fitzpatrick and his district general manager Mr. Mike Collier, and am most grateful for the time they gave me. They have set up a review, whose terms of reference would, I believe, answer the points made by the hon. Gentleman's constituents. The first term of reference is to inquire how cervical cytology tests were processed from receipt at the laboratory between March 1983 and December 1985, to the point at

which advice was submitted to a gynaecologist, a general practitioner or a clinical medical officer. The second is to assess the methods used to ensure a consistently high standard of reporting. The third is to inquire into the reasons for the delay in the doubts surrounding the suspect test results coming to light. The fourth is to assess whether improved management arrangements should be implemented, and the fifth is to make recommendations in the light of these terms of reference. The review is chaired by Mr. Fitzpatrick and has two other members of the health authority, neither of whom, as far as I know, have the fat salaries that have been mentioned. It includes a consultant pathologist from outside the Mersey region, nominated by the Royal College of pathologists, Dr. John Burston.

Mr. Fields: rose——

Mrs. Currie: I heard what the hon. Gentleman said—and I know that it was also requested yesterday by Mrs. Hopkins—about a public inquiry, publication, holding discussions on the matter in public and so on. Such calls are, as yet, premature. Until the review team has finished conducting its work and has reported to the Liverpool health authority I suggest that the hon. Gentleman holds fire. He alleges that there will be no self-criticism, but that is to prejudge the conclusions of the review. It is wise, as the review is expected to report shortly, first to see what it comes up with. I shall ensure that all those views are passed on.
As for court cases, I am sure that Opposition hon. Members are aware that, to date, two women have taken out High Court writs against the Liverpool health authority, and another 48 women have registered claims against the authority through their solicitors.
In all the cases and events that we have been discussing, we should put on record the fact the hon. Gentleman's constituents, working for the Liverpool health authority, have been making a big effort to improve their services to women, both because of pressure from the Government and because they believe it to be right. Liverpool health authority has developed its smear testing system and the treatment and laboratory facilities to back it up. There are no backlogs in Liverpool; it keeps within the one-month target, even with a huge throughput. It was the first district in the Mersey region to operate the computerised call and recall system, which has been in operation since 1 April. Last year, almost 17,500 smears were dealt with in that laboratory, of which some 1,500 were picked up as requiring further investigation. In other words, these efforts have ended, not in failure, but in a substantial detection of early cancer and pre-cancerous conditions, and thus in the saving of many lives of Liverpool women.
I am asked whether women should have confidence in the system, and the answer is yes. Opposition Members could join us in helping to restore confidence. Many of those who die of cervical cancer have never had a smear. Many are in the older age groups. If they do not have a test, and they allow themselves to be sufficiently put off by the events of several years ago, or by some of the remarks made tonight, the death rate from this preventable cancer will remain high on Merseyside, instead of coming down as it should. Whatever the faults of the Liverpool system may or may not have been, one thing would have been worse—no system at all. I urge any of the missing


women to come forward, and I urge those who have never been for a smear to come and ask for the test. That is the message I want to put on record tonight.

Question put and agreed to.

Adjourned accordingly at nineteen minutes past One o'clock.